Gov't to slowly phase down NFA activities

Government is considering a five-year time frame within which its intervention in the rice market -- including subsidies -- will be phased out in line with the impending privatization of the National Food Authority (NFA).

The Department of Agriculture has recommended that the NFA continue holding rice buffer stocks but to slowly phase it down from the current 30-day buffer level to 15 days and then to seven days within five years. Palay procurement levels will also be reduced gradually with the palay support price to be adjusted closer to market rates while rice import quotas will be allocated to more and more importers each year.

The DA said it also supports the recommendation of the Cabinet-level Economic Coordinating Council (ECC) that existing subsidy programs not be abolished until reforms have been properly put in place and fully operational.

The privatization of the NFA is a major condition for the release of the $175-million Grains Sector Development Program (GSDP) loan from the World Bank. Of this, $100 million will used for budgetary support and $75 million for agricultural infrastructure. As soon as the third tranche of the loan is released, the Japan Overseas Economic Cooperation Fund (OECF) is expected to lend out another $100 million for the GSDP exclusively for budgetary support.

The GSDP study estimates that only three percent of rice farmers directly benefit from NFA's palay procurement activities while its market intervention has failed to prevent high rice prices.

From 1986 to 1998, NFA's financial losses totalled P21 billion while operational subsidies from the government to the NFA during the period reached P13 billion. Also during the 12-year period, it is estimated that rice farmer losses due to NFA intervention average P4.2 billion a year.

From 1995 to 1999 alone, estimated cost of inefficiencies due to NFA's rice pricing and import policies totalled P231 billion while NFA's debts in 198 reached P27.6 billion.

Sen. Sergio Osmeña has already filed Senate bill no. 1834 which seeks to de-couple the regulatory and propriety functions of the NFA. A technical working group convened by the Senate committee on agriculture chaired by Osmeña is currently refining the provisions of the bill. Meanwhile, a public hearing on the house version of the bill -- HB no. 3894 authored by former Rep. Mar Roxas -- is scheduled on June 6 by the House special committee on food security.

The DA, in a position paper furnished The STAR, said the proposed privatization of the corporate functions and assets of the NFA stem from the agency's inability to effectively and efficient discharge its functions.

It said that under its present charter, the NFA has competing mandates and incompatible functions -- defending farmgate prices and at the same time making available cheap rice. These have resulted in huge financial losses for the government.

As part of NFA's privatization, the DA is recommending the establishment of a National Rice Board that will provide the rules and regulations governing rice trade, as well as supply and price stabilization. Other NFA regulatory functions will be transferred to other DA agencies.