The Federation of Free farmers Cooperatives (FFF) has raised concerns that the local farm industry could suffer significant financial losses if the government proceeds with its plan to reduce the tariff rate on rice imports.
This issue was discussed during the Tariff Commission's public hearing on the proposal to decrease the rice import tariff rate from 35% to 10% for six months.
Raul Montemayor, the FFF national manager, presented the farmers' group's calculations regarding the potential decline in farm income resulting from the proposed tariff reduction.
Montemayor explained that with an average landed cost of P27.34 per kilogram of imported rice, the tariff rate at 35% amounts to P9.57 per kilogram, whereas at a 10% rate, the tariff would decrease to P2.73 per kilogram.
If the tariff rate is reduced to 10%, as proposed, the reduction in tariff per kilogram of imported rice would be approximately P6.83.
“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.
Local farm industry to lose P88 billion due to rice import tariff cut
“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 a temporary reduction in the 35% rice import tariff rates, both for ASEAN and most favored nation (MFN) rates, to either 0% or a maximum of 10%. This proposal aims to address the surge in rice prices affecting consumers.
Due to the rising rice prices, the government implemented an unprecedented price control measure through Executive Order No. 39. This order imposes a price cap of P41 per kilogram for regular-milled rice and P45 for well-milled rice.
Roehlano Briones, a research specialist at the Foundation for Economic Freedom (FEF), explained that the tariff reduction would align with the objective of Executive Order No. 39, which is to lower rice prices for consumers. This measure is intended to mitigate the economic impact of rising rice prices on the public.