FILIPINO rice farmers are now seeking government intervention to cushion the impact of rising global oil prices and the Tax Reform for Acceleration and Inclusion (TRAIN) law, which have sent their production costs soaring.
For one, they are urging the government anew to issue fuel vouchers to aid them in coping with the increasing oil prices.
“We have been asking the government to give us fuel vouchers for years now. We asked this before from the National Food Authority [NFA] but to no avail,” Edwin Y. Paraluman, chairman of the Philippine Farmers Advisory Board, told the BusinessMirror.
“So we are renewing our call to give us fuel vouchers, especially when fuel prices are increasing. If they can give fuel cards to jeepney drivers, then why can’t they give farmers as well?” Paraluman added.
Rice farmers are affected by the increase in oil prices as farm machineries and equipment utilize fuel, Paraluman explained. “That will cause a domino effect. Increase in oil prices would lead to increase in fertilizer prices, and that would mean higher cost of production.”
The TRAIN law imposed an excise tax of P2.50 per liter on diesel products and P7 per liter on gasoline. A study recently conducted by the Philippine Rice Research Institute (PhilRice) concluded that “the TRAIN’s imposition of increased excise tax, unstable global fuel prices, and the peso-dollar exchange rate conspired” to raise rice farmers’ production cost.
And one of the recommendations of the study, authored by AIleen C. Litonjua and Jesusa C. Beltran, to help farmers cope with rising production costs, is to give “discounted fuel.”
“[The government could] explore ways to provide farmers with discounted fuel,” the authors said. “This will directly unburden them of the ill effects of TRAIN on rice farming.”
Under the TRAIN law, jeepney franchise holders are entitled to fuel vouchers to mitigate the increase in oil prices. For this, the government has allocated some P977 million, which is expected to be distributed to about 179,000 jeepney franchise holders.
Fuel costs increase
The study found an increase in the fuel costs of farmers across three different sources of irrigation.
Farmers exclusively using national irrigation systems (NIS) saw their fuel costs rise by P249 per hectare after the implementation of TRAIN; those using pumps to supplement irrigation incurred a P949 per-hectare increment in their fuel costs.
Farmers who solely depend on water pumps posted the highest increase in fuel costs, incurring an additional P2,014 per-hectare expenditure after the TRAIN law.
“Farmers who depend on pumps for irrigation water suffer from the increased fuel prices. Their fuel consumption accounts for some 30% of their total production cost,” the study explained.
“TRAIN increases the production cost of pump-dependent farmers by 50 centavos for every kilogram of palay produced, which diminishes their income by 10 percent,” it added.
The study said pump-dependent rice farmers consume about 397 liters to 413 liters of fuel per hectare, more then double the fuel requirement of those not solely dependent on pumps.
“The fuel price increases, therefore, disadvantage farmers who highly depend on pumps for water supply,” the study said.
The increase in the fuel costs of pump-dependent rice farmers translated into a 10-percent cut in their net income, according to the study. The study noted that farmers in 2016 earned P5.12 per kilogram but since the implementation of the TRAIN law, their net income went down to P4.62 per kilogram.
In 2016 farmers spent P12.31 to produce a kilogram of rice while they earn about P17.43 per kilogram, according to the study.
Recommendation
Pump-dependent rice farmers could recoup the increase in their production costs if farm-gate price of palay continues to increase, according to the study. But if it doesn’t, then they would be “even less competitive due to increased production cost,” and this would “deprive them of a higher income,” the study said.
So what should pump-dependent rice farmers do to cope with the increased in fuel prices? Produce an additional yield 105 kilograms per hectare “to maintain the same level of income,” according to the study.
And for them to do this, the study recommended, they should invest in farm machinery and slowly mechanize their operations.
“The DA-PHilMech [n.d.] asserts that farmers incur 4.29-percent harvest losses, which steal 214 kg/ha from the would-be gross yield of 5,000 kg/ha. Adopting the combine harvester can reduce this to only 2.11% [Regalado and Ramos, 2016], thereby saving more farmers’ produce without having to significantly increase fuel cost,” it said.
“The mechanized farmer only uses an additional 16-26 liters per ha, equivalent to PhP600-1,000/ha more cost under TRAIN-lifted prices. The estimated PhP6,000/ha additional net income [Litonjua et al., 2016] from using the combine harvester more than offsets the additional cost,” it added.
“Therefore, the increase in fuel prices has less impact on farmers who choose to mechanize,” the study concluded.
Furthermore, to cushion the ill effects of TRAIN on rice farming, pump-dependent farmers have to continue “using yield enhancing technologies, reduce harvest losses through mechanization, and adopt water-saving technologies like Alternate Wetting and Drying [AWD],” the study said.
AWD, according to the study, reduces farmers’ water use by 16 percent to 35 percent without decreasing grain yield.
The study also recommended that the government fast-track the completion of existing irrigation projects to increase the number of farmers benefiting from “free and reliable irrigation supply.” This, the study pointed out, would help pump-dependent farmers save on irrigation cost.
Support price
Paraluman said fuel voucher is just one of many subsidies the government could give the rice sector to cope with rising production costs.
“I hope the government could give us subsidies for us to be able to cut our production costs. They could give us high-yielding seeds and fertilizers,” he said. Furthermore, Paraluman, who represents the farmers’ sector at the NFA Council, sought an increase in the agency’s support price for palay to ensure the rice farmers’ profititability.
Paraluman said increasing the NFA’s palay buying price ensures farmers earn more instead of being at the mercy of loan sharks every harvest season.
Earlier this year, the NFA proposed to increase its buying price from the current P17 per kilogram to P22 per kilogram, but this was thumbed down by the NFA Council. Last month the NFA proposed to increase its support price to P25 per kilogram to become competitive against the buying price posed by traders in the market—ranging from P22 to P25 per kilogram.
“All farmers live on debts. The harvest is mortgaged to the lenders even while the palay is still standing,” he said, mostly in Filipino. “The service of the government should be for the people. What they get from the people’s income should also return to them.”
“The economic managers have been saying that increasing the NFA support price to P22 would be inflationary. But at the present P17, why did the prices of rice in the market continue to increase? The NFA has been obsolete in buying from farmers,” Paraluman added.
Paraluman said the NFA has been given P7 billion for its local palay procurement program but has only been able to withdraw some P1.8 billion due to its incapability to buy from local farmers.
While these ideas remain as proposals to the government, rice farmers are left with no choice: tighten their belts and borrow money.
“Farmers cannot do anything with the increasing production costs and rising prices of goods but to budget what they have,” Paraluman said. “They are only tightening their belts. And [they] will borrow money as their farm income is not sufficient to meet their daily needs.”