By Luisa Maria Jacinta C. Jocson, Reporter
THE NATIONAL Economic and Development Authority (NEDA) is looking into a temporary reduction in tariffs for rice to help lower domestic prices.
“To partially counterbalance the rise in global prices and alleviate the impact on consumers and households, we may implement a temporary and calibrated reduction in tariffs,” NEDA Secretary Arsenio M. Balisacan said in a statement on Tuesday.
Mr. Balisacan made the statement after data showed August inflation accelerated to 5.3% due to the spike in rice and fuel prices. In particular, rice inflation quickened to 8.7% in August from 4.2% in July.
A nationwide price ceiling on rice took effect on Tuesday, as part of the government’s effort to address rising prices of the national staple amid reports of hoarding and price manipulation by cartels.
Price monitoring data from the Department of Agriculture (DA) showed that as of Sept. 4, the retail price of local well-milled rice ranged from P48 to P56 per kilogram, while regular milled rice ranged from P52 to P55 per kilogram.
Executive Order (EO) No. 39 set the price cap on rice at P45 per kilogram for well-milled rice and P41 for regular milled rice.
“To manage upward pressures in rice prices, price controls on rice through EO No. 39 serves as a short-term measure against non-competitive practices by some market players. Price controls, when carefully calibrated and closely implemented, are effective in the near term,” Finance Secretary Benjamin E. Diokno said in a Viber message.
Mr. Diokno noted that if price controls are allowed to be implemented longer than necessary, it would trigger unwanted consequences.
“Supply will disappear, output will fall as farmers are discouraged to plant, and importers will refuse to import because the suggested domestic retail price is lower than the implied landed costs of imports,” he said.
Meanwhile, former Agriculture Undersecretary Fermin D. Adriano said that the price ceiling will rattle the rice supply chain.
“The price cap will negatively impact the rice value chain from farmers whose palay (unmilled rice) will not be bought because traders will lose money. Traders will not import because the rice ceiling is lower than the cost of rice imports, and consumers because rice will gradually disappear from the market since traders will not sell if they are going to lose money. A black market will develop,” he said in a Viber message.
Sonny A. Africa, executive director of think tank Ibon Foundation, said that the price cap may initially stabilize prices but noted the second-round effects on small traders and rice farmers.
“A protracted price cap without minimum farmgate prices and support for small traders may just end up disrupting rice supplies which would only drive up the underlying price of rice even more,” he said in a Viber message
On the other hand, Jayson H. Cainglet, executive director of Samahang Industriya ng Agrikultura (SINAG), said in a statement that the price cap is a compromise to help farmers and protect consumers.
“If they lower the price ceiling, farmers will be the most hit by this and farmgate prices will sink to P17-19 per kilogram. If they raise it, consumers will be affected by this and importers,” he said.
Mr. Cainglet said that there is no reason to hike the retail price of rice as there is no shortage of supply.
“Traders capitalized on the initial public panic created by the statement of the National Food Authority (NFA) that government buffer stock is only good for 1.5 days. Our stocks are good to last until the first quarter of next year and we have yet to harvest the expected 7 million metric tons (MT) of rice this harvest season,” he said.
“At any given time, our buffer stock is good for 50-60 days, prior to the onset of the harvest season later this month.”
For his part, Mr. Adriano called on the government to lift the price cap immediately and instead reduce or remove tariffs on rice imports.
The Foundation for Economic Freedom (FEF) earlier suggested the government cut import tariffs on rice from Association of Southeast Asian Nations (ASEAN) countries to 10% from the current 35%.
Mr. Africa said that the government should focus on the long-term solutions to rely less on imports and focus on ramping up local production.
“The government should accept that domestic rice production hasn’t substantially improved since rice liberalization four years ago and, if anything, our rice import dependence is getting worse. We may be forced to import more if supplies remain low in the coming harvest season, but this should be a temporary stop-gap measure at best. Rice self-sufficiency should be a goal exactly as it has been for the countries that we’re importing our rice from,” he added.
Data from the Bureau of Plant Industry showed that the Philippines imported 2.19 million MT of rice in the January-August period.
The United States Department of Agriculture projects the Philippines’ rice imports to reach 3.8 million MT this year.