NFA wants private sector to take over rice importation

The debt-ridden National Food Authority (NFA) is encouraging the private sector to increase its participation and eventually take over the government’s function of importing rice to bridge the country’s supply shortfall.

"We have in recent years, been asking the private sector to actively participate in our rice import program to ease the burden on NFA which has had to increasingly rely on bringing in the commodity to ensure stable supply and prices of rice," said NFA Administrator Gregorio Tan Jr.

Tan, who defended the NFA’s losses in a budget hearing at the Senate last Tuesday, said the private sector takeover of this responsibility will allow the state-run agency to gradually make a turnaround from its huge loss of P22 billion in 2005.

"The losses that we have been incurring come mostly from our function of importing rice at a high cost and selling these at prices lower than market rates. We are encouraging the private sector to take over this responsibility but their response was lukewarm,"said Tan, adding that last year, the NFA was forced to import the balance of the 200,000 metric ton (MT) allocation given to the private sector since it could only bring in 8,000 MT.

Tan said that because of escalating prices of rice in the world market, the private sector is not keen on participating in NFA’s rice import program.

He noted that from 2001 to 2005, the NFA’s import costs have gone up by 111 percent due to higher rice prices which went up by 89 percent while foreign exchange rates went up by 22 percent in the last four years.

In contrast, the NFA’s selling price has remained stagnant. Its regular-milled rice is sold to retailers at P15-16 per kilo while well-milled rice is sold at P18 per kilo compared to its import cost which now averages P16 to P16.50 per kilo.

"There is a policy decision to be made. Should government go the way of the National Power Corp. which was allowed to raise its energy rates at the expense of consumers?" asked Tan.

He explained that if the government allows NFA to raise its selling price, the agency can implement a turnaround in its dire financial condition but stressed that unlike Napocor where the cost of higher power rates was borne mostly by affluent residential users and commercial and industrial customers, most of NFA’s buyers consist of poor or marginalized consumers.

Tan challenged government policymakers to make that crucial decision on whether or not NFA should be allowed to continue its twin mandate of buying grains at above market prices from farmers and distributing these at cheaper prices to consumers.

The agency is mostly involved in the trading of rice and corn. It implements the government’s rice support program by buying palay from farmers and selling these at subsidized prices in strategic areas to stabilize prices.

At the same time, NFA is mandated to handle the country’s rice import program.

Its conflicting tasks have caused NFA to absorb huge losses. With inadequate budgetary support, the NFA is finding it more difficult to fund its programs and has been relying on commercial loans to carry out its mandate.

Tan said that NFA’s outstanding commercial loans amount to P30.4 billion.

Last year, NFA issued P8 billion worth of long-term notes to fund its local rice procurement program and its increasing rice importation requirements. It was the second consecutive year that the NFA has tapped the Land Bank of the Philippines to arrange and execute a similar loan facility. In April 2004, Landbank funded NFA’s entire P5 billion issue.