The National Economic and Development Authority (Neda) and economists on Wednesday expressed their opposition to the proposal of the National Food Authority (NFA) to increase its support price for palay by P8 per kilogram (kg).
Neda Undersecretary for Policy and Planning Rosemarie G. Edillon and Regional Development Office Assistant Secretary Mercedita A. Sombilla said increasing the
procurement price to P25 per kg, from P17 per kg will accelerate inflation. Sombilla said the Neda is now getting updated production cost figures to determine whether there is a need for an increase and, if it is necessary, by how much.
“The cost is obvious: inflation and NFA debt pileup but the benefits are unclear. We will ask for an intensive cost-benefit analysis first before we can agree [to the increase in buying price],” Edillon said.
She added that, during a recent meeting with rice traders, the private rice traders informed the government that should the NFA hike its support price, they will follow suit.
“This means that the NFA will still not be able to get a big market share, but for sure, the price of rice will really go up. And since rice has a big weight in the consumer basket, then yes, [it will result in] high inflation,” Edillon said.
In March 2008, when the NFA jacked up its buying price to P17 per kg from P11 per kg, inflation nationwide was only at 5.9 percent. The following month, inflation quickened to 7.3 percent.
Data from the Philippine Statistics Authority (PSA) indicated that the increase in commodity prices in 2008 even reached double digit, with the highest registered in August at 10.5 percent.
Inflation is currently on the uptrend following the implementation of the Tax Reform for Acceleration and Inclusion, which slapped higher taxes on a number of products, such as sugar-sweetened beverages.
With this, even local economists had warned against hiking the procurement price to P25 per kg, saying it is “too steep” a price for the government to pay for unmilled rice.
University of Asia and the Pacific Center for Food and Agribusiness head Rolando T. Dy said if the NFA will increase its support price, rice prices would double. The average retail price of regular milled rice and well-milled rice is at P40.04 per kg and P43.86 per kg, respectively. “It’s cheaper to import if minimizing NFA losses is the goal. But there are other goals,” Dy told the BusinessMirror on Wednesday.
Philippine Institute for Development Studies Senior Research Fellow Roehlano M. Briones said increasing the support price could cost the government P25 billion if it would buy 5 percent of farmers’ harvest. Briones said this estimate takes into account the NFA’s previous procurement target of 1 million metric tons (MMT).
“The government has no funds to buy significant quantities of palay. [There will be] no impact on the rice market but it will widen deficit,” Briones said.
If the NFA will just resort to importation, Sombilla said this will also entail increasing its borrowings. The food agency’s current debt is pegged at P160 billion. The only “true solution”, Sombilla added, is to convert the country’s quantitative restriction into tariffs and restructure the NFA. “The impact of increasing support price by P8 per kg is huge.”
.jpg)
