The Federation of Free Farmers (FFF) warned that poor consumers will have to pay more for rice under the Tariffication Law that was recently signed by President Rodrigo Duterte. The farmers’ federation explained that the Tariffication Law now limits the NFA’s role to maintaining buffer stocks and provides that the buffer stocks can be released only during times of emergencies and calamities. In recent interviews, Department of Trade and Industry Secretary Ramon Lopez confirmed that NFA will stop selling rice unless there is a calamity or emergency once the new law takes effect on March 3. This means that consumers will now have to get their rice requirements from private importers, traders and retailers.
Raul Montemayor, National Manager of the FFF, noted that, at current prices, it will cost importers at least P29 pesos to bring in the rice after paying a 35% import tax or tariff. By the time this rice reaches the retail market, the selling price could go up to P35 per kilo after providing for transfer costs, profit margins and related costs. This means it will be impossible for private traders to match the P27 price of the NFA.
“Retail prices could indeed go down from the current P40 per kilo level to P35. But for the poor consumers, this means an increase of P8 per kilo compared to the P27 they used to pay for NFA rice. Those who will benefit from the imports will be relatively better off consumers who can actually afford to pay more but will now enjoy a P5 reduction in prices. So, is this what the economic planners mean when they say that tarrification is for the ‘greater good’? It will be a repeat of TRAIN where low salaried employees who did not pay income taxes before did not get anything, while employees with higher salaries were freed from paying taxes on their incomes.”, explained Montemayor.
Montemayor added that the disappearance of cheap NFA rice from the market will lead poor consumers to shift to more expensive commercial rice. This additional demand could put pressure on commercial rice prices, as what happened in 2018, to the disadvantage of both poor and better off consumers.
Ruben Presilda, FFF President, also questioned the theory of the economic managers and Senator Cynthia Villar that the opening up of the rice market and the phaseout of NFA intervention in the market will lead to better competition among market players and result in cheaper prices for consumers. “In previous years, there were more than 200 groups who secured import quotas from the NFA for 805,000 tons under the minimum access volume or MAV program. The NFA detected however that there were only five large financiers for all these quota holders. Most of the quota holders were actually dummies of the financiers”, said Presilda.
“So a free import system without government intervention can easily be manipulated by a few large importers and financiers. One local company has been reported to have already booked a contract from a Vietnamese state agency for the supply of 2 million tons of rice. With that volume, the company can dominate up to one half of the rice import business and about 17% of the domestic rice market. The free market theory works only if there are many buyers and many sellers, and not one buyer or seller can influence the market. If this theory of the economic managers and Senator Villar does not work, it is only proper that they all resign and go back to school.”, added Presilda.