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Rice tariff cuts not seen affecting ‘core’ RCEF modernization effort

11 June 2024

THE REDUCED duties on rice imports will shrink the pool of money available to allocate as farmer aid under the Rice Competitiveness Enhancement Fund (RCEF), but will not affect the core RCEF programs involving farm modernization, analysts said.

Roehlano M. Briones, a senior research fellow with the Philippine Institute for Development Studies, said that the reduced tariffs will be felt mainly in the funding available for assistance to rice farmers.

“But core programs will not be affected, so no effect on production,” Mr. Briones said in a Viber message.

Last week, the Board of the National Economic and Development Authority (NEDA) approved a plan to lower tariffs on industrial and farm goods. This included the further reduction of rice import tariffs to 15% from 35% until 2028.

“What will be affected will be tariff collections in excess of P10 billion which are supposed to fund supplementary programs for farmers such as financial assistance,” Raul Q. Montemayor, national manager of the Federation of Free Farmers, said in a Viber message.

RCEF is supported by rice import tariffs, as authorized under Republic Act No. 11203 or the Rice Tariffication Law of 2019. The law originally allocated P10 billion in tariff money to RCEF for six years, though legislators are working to extend RCEF’s term and expand its allocation.

Under the proposed amendments from the House of Representatives, 53% of RCEF will go to mechanization, 28% to rice seed, and the rest to farm credit and extension services.

The Department of Agriculture (DA) has said that any potential gaps in RCEF funding will be made good by the department.

Leonardo A. Lanzona, an economics professor at the Ateneo de Manila, said that the government needs to find alternate sources of funds to support RCEF.

“The impact of reduced tariffs on RCEF goes beyond simply funding,” he added, citing the possibility of rice and other crops becoming less competitive.

“Industry is disproportionately favored by this policy,” he added.

He said that the government must implement a comprehensive plan to employ any workers who may be displaced by the tariff policy.

“Unfortunately, we have not heard of such plans since the government is leaving much of these movements to markets. The problem is that markets do not perform well in achieving structural transformation,” Mr. Lanzona added.

Former Agriculture Undersecretary Fermin D. Adriano said that the government has allocated sufficient funding to rice farming.

“Tariff collection as of end of May is already P16 billion, more than the sum required by RCEF. The DA’s National Rice Program has a budget of P30.8 billion this year. This is on top of the NIA (National Irrigation Administration) budget of P42 billion — 80% of its water goes to supporting rice farmers for free,” Mr. Adriano said in a Viber message.

Where the tariff policy could be felt the most is in terms of farmgate prices, according to Rosendo O. So, chairman of the Samahang Industriya ng Agrikultura, who estimated that reduced tariffs could bring down the price farmers receive for their harvest to about P17 per kilo.

“If the solution to lower rice prices is to subsidize, why are importers and Vietnamese farmers still being (prioritized)?… Why not instead, buy from local farmers?,” he said.

The government is estimating a P6 to P7 per kilo decline in the rice process following the reduced tariffs on imported rice.

“Ang lens ng NEDA ay sa rice prices lang; bahala na mamatay ang mga rice farmers at magsara na sa negosyo ang mga millers (NEDA is focused on rice prices only and is not too concerned with the livelihood of rice farmers or millers),” Mr. So said.

He added that prior to the NEDA Board’s decision the rice industry and the DA had agreed on a floor price for buying palay (unmilled rice).

Millers and traders were to buy palay at an assured price of P25 per kilo, with the government intended to sell the procured rice at between P35 and 40 per kilo, he said.

Source : bworldonline