A group of economists and businessmen called on the government to lift or reduce import tariffs for rice from 35 percent to 10 percent to arrest the surging price of rice, instead of imposing a price ceiling on rice.
The Foundation for Economic Freedom said Executive Order NO. 39, which places a price ceiling of P 41 per kilogram on regular-milled rice and P45 per kilo on well-milled rice, would harm Filipino consumers and farmers, and the entire economy.
“The price cap will harm consumers because it will drive supply away from the market, fuel a black market for rice, cause traders to cheat consumers by mixing inferior broken rice with regular and well-milled rice, and incentivize traders to hoard as the price ceiling is below their procurement and selling prices,” it said.
Lower-income consumers in particular will suffer when regular milled rice becomes less available in markets at a controlled price and is passed on as well-milled rice by traders, FEF said.
EO 39 will similarly harm farmers because traders will use the price cap to justify lowering their buying prices for palay or simply refuse to buy palay from the farmers as they will lose money due to the high farmgate price of palay, the group said.
FEF said the price cap would harm the entire economy because it would not be effective in solving the demand-supply gap and arrest increasing food price inflation.
“It will only aggravate the current tight rice supply situation into a full-blown rice crisis. An Executive Order cannot repeal the law of supply and demand,” it said.
FEF suggested that import tariffs, now at 35 percent for rice imports from ASEAN countries, be lifted or reduced to 10 percent.
“This will have an immediate effect on lowering rice prices. The government can afford to lower rice tariffs because the mandatory P10 billion allocation for the Rice Competitiveness Enhancement Fund as stipulated by the Rice Tariffication Law, has already been achieved. A recent report by the Bureau of Customs revealed that tariff revenues from rice import stands at a healthy P16.8 billion as of Aug. 23,” it said.
“The government may restore the tariff rates back to 35 percent when the demand and supply situation stabilizes and if the onset of the harvest season results in falling rice prices,” the FEF said.
Meanwhile, the National Economic and Development Authority said it supports the issuance of Executive Order No. 39 on imposing mandated price ceilings on rice to combat hoarding, profiteering, smuggling and cartelization.
“We are facing difficult times, and concerning the agriculture sector, the El Niño Southern Oscillation phenomenon is a major disruptor. The ENSO has intensified the Southwest Monsoon and is expected to result in below-normal rainfall towards the end of the year in many countries along the Pacific. These extreme weather events adversely impact the agriculture sector, particularly rice,” NEDA said in a statement.
NEDA said the trade-restricting protectionist behavior of certain rice-exporting countries, such as India’s ban on non-basmati rice exports to keep prices low at home, and the aggressive move of rice-importing countries to secure supply resulted in a decrease in the volume of rice being traded and expected to be traded in the global market. The government’s priority amid this situation is to ensure that the country has an ample supply of affordable rice, it said.