NFA must continue buying local rice

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The Senate is currently stepping up efforts to convert the quantitative restriction (QR) on rice into tariffs, a move that is expected to bring rice prices down and ease inflation. Economic managers have been banking on the scrapping of the rice quota to make rice more affordable, particularly to the poor, who spend at least a fifth of their income on the staple. The poor, who cannot afford to buy more expensive sources of protein, such as pork or chicken, consume more rice to fill their stomachs.

By removing the QR on rice, Manila is effectively signaling to the world that it is ready to allow the entry of cheaper rice. The QR on rice, or import quota, has allowed the Philippines to limit the entry of cheaper staple from neighboring Southeast Asian countries, such as Vietnam and Thailand. With the removal of the nontariff barrier, economic managers expect that the average retail price of rice would go down by as much as P7 per kilogram (kg).

The downside of the removal of rice QR is the competition cheap rice imports would pose to locally produced palay. Based on the BusinessMirror’s computation, 5 percent broken rice from Vietnam can be purchased at P20 per kg. Even at a 40-percent tariff, the landed cost is anywhere from P28 to P30 per kg. The amount is much lower than the current average price of P43.86 per kg, according to data from the Philippine Statistics Authority.

Assuming that rice imports would not be hoarded by unscrupulous traders (unlike other farm products, rice can be stored longer), the influx of cheap rice would spell doom for farmers who remain uncompetitive compared to their counterparts in Vietnam and Thailand. If importing rice is more cost-efficient, traders who used to scramble for locally produced palay would rethink their plans. Farm-gate price could go down if traders suddenly become uninterested in local rice. While consumers will have their cheap staple, some 2.4 million rice farmers would be hard-pressed to look for alternative crops.

This scenario can be avoided if Congress would still allow the National Food Authority (NFA) to buy palay from farmers. There are proposals from economic managers to stop the NFA from intervening in the market, which means the agency should stop buying and selling rice. But this should not be done right after Congress has removed the QR on the staple. The food agency must be allowed to at least continue buying rice from farmers for buffer-stocking purposes for two years.

This is one of the measures that we believe the government should consider when it crafts a plan that would help farmers adjust to a new rice-trade regime. Congress can consider allocating part of the Rice Competitiveness Enhancement Fund for the NFA’s palay-buying program.

The tariffication of rice is expected to be completed this month, and the Department of Agriculture would unveil its road map for the sector once the measure is signed into law. We hope that the DA is conducting the necessary consultations with sectors affected by the removal of the quota. This will ensure that strategies employed by the government will have an impact on those whose lives have long depended on the most important grain in the country.


businessmirror

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