Group says farmers stand to lose P88B due to rice import tariff cut

The local farm industry will lose billions of pesos if the government pushes through with the planned reduction of tariff rate on rice imports, the Federation of Free Farmers Cooperatives (FFF) said Friday.

During the Tariff Commission’s public hearing on the proposed reduction of rice import tariff rate to 10% from 35% for six months, FFF national manager Raul Montemayor provided the farmers group’s computation on the potential drop in farm income due to the proposed tariff cut.

Montemayor said at an average landed cost of P27.34 per kilo of imported rice, the tariff at 35% is at P9.57 per kilo, while at 10% rate the tariff will go down to P2.73 per kilo.

Should the rate be slashed to 10%, the tariff reduction would be about P6.83 per kilo.

“So the potential reduction in the price of rice is about P7 per kilo… If we assume, if rice prices go down by P7 per kilo, the effect of that in palay price would be about P4.44 per kilo [reduction],” the FFF official said.

“If there is a direct transmission in tariff reduction into a reduction in palay prices, multiply that by palay production in 2022 [at 19.75 million metric tons], the farmer’s losses will be about P88 billion in terms of reduced income,” Montemayor said.

“It’s just a potential but it could happen,” he added.

The Department of Finance (DOF) is proposing “the reduction of the 35% rice import tariff rates, both ASEAN and MFN [most favored nation] rates, temporarily to 0% or maximum of 10% to arrest the surge in rice prices."

The rising rice prices compelled the government to impose an unprecedented price control on the staple through Executive Order No. 39, which mandates a price cap of P41 per kilo for regular milled rice and P45 per kilo for well-milled rice.

For his part, Foundation for Economic Freedom (FEF) research specialist Roehlano Briones explained that “tariff reduction will support the objective of EO No. 39 to lower rice prices for the consumers.”

FEF is proposing to cut the tariff rate for rice imports to 10% temporarily for six months.

Briones presented an “envelope calculation,” showing that if the tariff on rice is cut to 10%, the landed cost falls to P36.40 per kilogram which would then “give added flexibility to downstream distributors.”

“Applying 2018 to 2023 average retail-to-wholesale margin gives a retail price of P45, which just matches the retail price ceiling for well-milled rice,” Briones said.

Montemayor, however, said FEF’s “envelope calculation” has “billions of pesos of implications to local farmers.”

Briones, nevertheless, said that “once world markets normalize or the demand and supply situation stabilizes, the tariff can be adjusted back to its previous level.”

RCEF

Apart from potential income losses to local farmers, Montemayor said the tariff reduction would also translate to foregone revenues for the government, which then affect the assistance given to the local rice industry through the Rice Competitiveness Enhancement Fund (RCEF).

“Based on our study of BOC (Bureau of Customs) data, the average price of imported rice from January to August this year was about P27 per kilo or P27,335 per metric ton. Let’s assume, we will import 3 million tons. At 35% tariff, we should collect P28.7 billion. At 10%, we will collect P8.2 billion,” Montemayor said.

“So the foregone revenue for the government will be about P20.5 billion,” he said.

Under the Rice Tariffication Law, P10 billion in rice tariffs collected will go to the RCEF —an annual appropriation of P10 billion for six years starting from 2019.

The fund will be used to provide farm machinery and equipment, credit assistance, seed development, and training to increase local rice farmers’ yield and competitiveness.

The RCEF is divided among four key programs —namely rice farm mechanization (P5 billion), seed propagation (P3 billion), rice credit assistance (P1 billion), and extension services (P1 billion).

Rice tariff collections in excess of P10 billion, meanwhile, shall go to the Rice Farmer Financial Assistance Program.

“So if the tariff is down to 10%, there is no more excess because we collect only P8.2 billion. Unlike if it’s at 35%, the excess of that goes to farmers will be P18.7 billion in addition to the P10 billion under RECF,” Montemayor said.

Signed by then President Rodrigo Duterte in February 2019, the Rice Tariffication law allowed liberalized rice trade, replacing the quantitative restrictions on rice imports with tariffs. —VAL, GMA Integrated News