The National Food Authority (NFA) will continue to purchase paddy from farmers and import rice, if necessary, to beef up its buffer stock even after the quantitative
restriction (QR) on the staple has been lifted.
The NFA made the statement in reaction to speculations that with the lifting of the rice QR in favor of higher tariffs on imports, the food agency may have to be reorganized to limit its functions to proprietary activities, such as buffer stocking and local procurement.
“If the past few years are any indication, we have seen a trend where palay farm-gate prices have been on the uptrend, higher than the NFA’s support price of P17 per kilogram [kg],” NFA Administrator Jason Laureano Y. Aquino said in a statement.
“This is the reason the NFA has not been able to meet procurement targets, resorting to importation to fill in the buffer stock requirement for food security,” he added.
The NFA said it will take a while before the domestic rice market would be able to adjust to the non-QR regime. Under a non-QR regime, Aquino said the government should continue to provide safety nets for the farmers who may be most affected by the freer entry of imported rice into the Philippines.
“We cannot speculate on how much lower rice prices could go under a non-QR but higher tariff situation. Our role in the NFA is to ensure that there will always be enough affordable rice for everyone, including the small farmer-producers who are also end-consumers of their own produce,” Aquino added.
Aquino said small farmers eventually sell their own harvests, sometimes in advance, thus they end up buying from the market for their family’s daily consumption.
The NFA will also continue to perform its regulatory function by issuing import licenses to traders and importers, and provide the necessary guidelines to ensure food safety and quality standards of rice imports, according to Aquino.
Aquino’s statement came days after the Department of Finance (DOF) said the commercial price of rice could go down by as much as P7 once the QR on the staple is lifted and that the food agency could just focus on local palay procurement.
In an economic bulletin on the rice-sector reform, Finance Undersecretary Gil S. Beltran said a 35-percent import tariff on rice in lieu of restricting rice-import volumes would encourage private traders to bring in the staple into the country, which would allow the influx of cheaper rice in the domestic market.
Instead of subsidizing imports, the national government could reallocate its funds to invest in public goods and services that directly benefit the farmers, including farm-to-market roads, irrigation and storage, which reduce production and marketing costs, according to Beltran.
The NFA is mandated to import and regulate rice imports, and has so far received a total of P187 billion in tax subsidies for its purchases of imported grain from 2005 to 2015, or an average of P19 billion a year, according to the DOF.
“Note that in its present state, the NFA loses about P11 billion annually, [that], even after operating subsidy of P5 billion average per year from 2005 to 2015…[still] has an accumulated debt of P155.84 billion as of the end of September 2016,” Beltran said.
The Philippines is under pressure to convert its QR on rice into ordinary customs duties after its waiver on the special treatment on rice expired on June 30. The World Trade Organization (WTO) General Council approved the waiver, which allowed Manila to keep its rice QR until June 30, on the condition that the Philippines will subject its rice imports to ordinary custom duties by July 1.
The conversion of QR into tariffs requires the amendment of Republic Act (RA) 8178, which allowed the government to continue implementing the caps on rice imports even after the WTO waiver has expired. But Congress was forced to delay discussions on amending RA 8178 as lawmakers were focused on passing the 2018 national budget and the first package of the tax-reform program before their Christmas break on December 13.