Rice tarrification: A litany of broken promises

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(First of two components)

The rice tariffication legislation (RTL) was born on Feb. 14, 2019 when President Rodrigo Duterte signed it, promising a number of advantages for customers and beneficial properties for the financial system.

Removing quantitative restrictions, or limits in quantity, on rice imports had been touted to considerably cut back costs that buyers, significantly the poor, pay for rice.

Farmers would get assist lowering manufacturing prices and growing their yields to compete with cheaper imports and nonetheless earn cash.

The authorities, significantly the National Food Authority (NFA), can be free of its expensive and graft-prone capabilities of importing, shopping for excessive from farmers, after which promoting low and sometimes at a loss to customers.

Market gamers would then have the ability to freely and overtly function and compete with one another with minimal authorities interference. The liberalization and deregulation of the rice market would finally profit the consuming public and the financial system as a complete.

But has RTL lived as much as these rosy promises and protections two years after it was applied? Sadly, knowledge present that it has not.

Consumers are not any higher off at this time than earlier than RTL. Producers have incurred billions of pesos in losses. Only the intermediaries in between them—merchants, wholesalers, retailers and importers—have really benefitted from the legislation.

In flip, the federal government has been pressed to intervene and spend billions of pesos on issues that emerged from the legislation’s enforcement. This even because it has misplaced most of its powers to regulate profiteering and stabilize costs. The authorities has been remiss in doing its homework and complying with many of the legislation’s provisions.

Retail costs for customers didn’t go down as promised (customers ended up paying Php 6.16 billion extra for rice).

Data from the Philippine Statistics Authority (PSA) present that the common retail value of rice in 2020 was solely 36 centavos per kilo decrease than it was in 2017. This interprets to a saving per shopper of solely 12 centavos per day.  In 2019, or the primary yr of RTL, rice was really dearer than it was in 2017 by 73 centavos per kilo in retail.

Deception

The declare that RLT has tamed inflation is misleading as a result of inflation charges can fluctuate considerably relying on the bottom interval used. It is true that costs at this time are considerably decrease than they had been in the course of the rice disaster in 2018.  But 2018 was an irregular interval, and the costs then can’t be the premise for figuring out actual value modifications ensuing from the RTL.

When evaluating retail costs to these in 2017, which is the newest “normal” yr previous RTL, customers are literally no higher off.  Inflation has stabilized previously few months not as a result of costs have gone down. They have really remained “high” opposite to RTL predictions.

Rice costs remained caught at near-2017 ranges regardless of the flood of rice imports following RTL enactment. This is a far cry from the predictions that RTL would convey down rice costs by as a lot as P7 per kilo and that imported rice would have the ability to match NFA’s promoting value of P27 per kilo. In 2019, rice imports reached a complete of 3.17 million tons, or almost 2.5 occasions our provide deficit. In 2020, imports fell to 2.12 million tons, however this was nonetheless round 75 p.c greater than our precise importation wants. All of these imports had been cheaper than native rice. Yet, retail costs hardly modified when in comparison with 2017 ranges.

RTL was supposed to learn poor customers particularly, nevertheless it additionally failed to take action. Before the legislation took impact, NFA was importing largely regular-milled rice (RMR) with 25 p.c broken grain on the market to poor customers.

The legislation then banned NFA from importing rice and promoting shares besides throughout emergencies or as replenishment for previous inventories. Private merchants took over imports however opted to usher in premium rice grades as an alternative on the market to comparatively well-off customers. Nearly three-fourths of whole imports in 2019-20 had been for rice with solely 5 p.c broken grain. When NFA’s backed P27 per kilo rice disappeared from native markets, poor customers had no selection however to purchase regular-milled industrial rice (RMR) at a median of P37 per kilo.

In financial phrases, customers needed to fork over an additional P8.59 billion in 2019— in comparison with 2017—for his or her rice wants.  In 2020, retail costs had been solely marginally decrease than they had been in 2017, leading to comparatively small shopper financial savings of P2.43 billion or about P22 per individual for the entire yr.  Overall, customers misplaced out as an alternative of gained something in the course of the first two years of RTL.

As predicted, palay costs plunged with the enactment of RTL and the following flood of rice imports. In 2019, farmers obtained almost P2 much less per kilo than in 2017 for the palay they offered commercially. They didn’t fare significantly better in 2020, struggling a cumulative loss of P56 billion within the first two years of RTL. On the common, farmers’ incomes fell by round P6,000 per hectare per season.

The billions spent by the NFA and a few native authorities models (LGUs) did not prop up palay costs considerably. Farm gate costs throughout the principle harvest seasons of 2019 and 2020 slumped to traditionally low ranges. Prices did go up in April to June 2020, however this was largely on account of transportation bottlenecks and elevated demand for rice for reduction operations following COVID-19 lockdowns.

RTL promised that the beneficial properties of customers would far outweigh the losses of farmers. In actuality, each customers and farmers misplaced, with the farmers shedding 9 occasions greater than customers.

Stuck in place

Proponents of the RTL additionally mentioned that the discount in palay costs can be offset by increased yields, decrease prices of manufacturing, and improved productiveness ensuing from the yearly P10 billion Rice Competitiveness Enhancement Fund (RCEF) and different interventions.

The newest PSA knowledge present that there was virtually no enchancment in output in 2020 in comparison with 2017. The common yield per hectare in 2019-20 was solely 3 p.c higher than what it was in 2016-18. At this fee, it should take as much as 20 years earlier than our farmers attain the six (6) metric ton per hectare degree that may convey them at par with their Vietnamese and Thai counterparts.

Interestingly, rain-fed areas carried out higher in phrases of productiveness development in comparison with irrigated areas the place most of the RCEF funds had been invested and the place main enhancements in competitiveness and yields had been anticipated to return from.

RCEF has been beset by quite a few issues arising from RTL provisions that positioned the burden of implementing multi-billion-peso packages on small analysis businesses with restricted capability and manpower. The COVID pandemic has hampered additional the well timed distribution of seeds, machineries and different assist to farmers.

Only about half of the P20 billion allotted for the primary two years of RTL has been disbursed to this point. Even then, it’s uncertain if P10 billion a yr in RCEF assist could be a game-changer within the business that generates a gross output worth of solely P320 billion a yr.

RCEF has additional compartmentalized the assist packages of the DA, dividing the nation into program and non-program areas and limiting interventions to a hard and fast menu of seeds, machineries, credit score and extension.  As a outcome, the impression of these piecemeal interventions are sometimes negated by the shortage of irrigation, advertising and marketing and different assist providers which might be equally if no more necessary for farmers.

Until now, no clear impression monitoring and evaluation system is in place to find out if the efforts to make farmers each cost-competitive and worthwhile are succeeding. In reality, even the Rice Road Map, which is meant to chart the business’s path in direction of competitiveness and meals safety and delineate vital targets and milestones, has not but been accomplished.

The common space harvested in 2017-18 declined by p.c in 2019-20. This may very well be a sign that some farmers are transferring away from rice. Those who can be unable to regulate to cheaper imports had been anticipating assist in shifting or diversifying to different crops and livelihoods. Until now, nonetheless, there isn’t a clear program for this transition. Farmers are mainly left on their very own. Tariff collections from rice imports in extra of P10 billion per yr had been alleged to be tapped for crop diversification packages, however the funds have since been reallocated by the Senate for money transfers for the poor.(Editor’s notice: Raul Montemayor is nationwide supervisor of Federation of Free Farmers)

(Part 2: Who advantages from a deluge of rice imports?)


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