NFA Administrator Gregorio Y. Tan Jr. explained that while the NFA had been effectively performing the mandates of food security and supply and price stabilization over the past 33 years, it will continue to incur losses as long as the government will not provide the agency sufficiency funds for its operational costs to subsidize the price of palay at the farmgate and rice at the consumers’ level.
Tan added that while the NFA’s subsidy allocation had continuously been whittled down over the past 10 years, it was even required to pay a 50-percent tariff on its rice imports since 2002, causing the agency to further bleed financially. About 86
percent of NFA’s losses in the past three years went to tariff duties (68 percent) and interest cost (16 percent) of borrowings from financial institutions to pay for the tariff.
What is ironic, Tan said, is that people expect the NFA to earn income as a government corporation. But while corporations are created mainly to make profit, he said, the nature of NFA’s operations is no different from other social-oriented agencies like the social service and welfare department.
"In fact, the NFA is even in a more unique situation, performing the multi-faceted roles of being a buyer, seller, stabilizer of both sides of the grains market, food security czar, and provider of rice supplies for government and private relief operations during natural or man-made calamities," Tan said.
He explained that in order to stabilize the grains market, the NFA buys high (now up to P10.50 per kilogram of palay) when traders offer much lower prices at the farmgate to help the farmers get a commensurate income from their produce. It sells quality but low priced rice in the markets (at P18/kg of well-milled rice versus P22-24/kg of same variety commercial rice) to give majority of Filipino consumers continuous access to affordable rice.
"No corporation will ever implement this marketing strategy if its main objective is to profit from its operations," Tan said.
Equally important to price and supply stabilization is in the NFA’s mandate of ensuring national food security. This means the agency must maintain a 15-day buffer stock of rice at any given time, in order for the government to quickly and effectively respond to any calamities or emergencies that may hit any part of the country.
Related to this, the agency must maintain sufficient food security stock in strategic locations all over the country to effectively respond to crisis situations such as strong typhoons, earthquakes and flashfloods that could isolate any of the Philippine archipelago’s islands.
But when local harvest is short, the government imports rice, through the NFA, to maintain the food security stock requirements. The timing and volume of rice imports are decided by an inter-agency committee and approved by the President prior to implementation by the NFA.
"Certainly, no profit-oriented corporation will pour in so much money and resources in maintaining strategic rice reserves for unforeseen emergencies, especially in far-flung areas of the country. Moreover, no businessman would ever worry dispersing stocks from surplus to deficit areas and sell the commodity at a uniform price across the country," Tan explained.
He said that instead of criticizing the NFA for its so-called "losses," both the government and the private sector must look into the impact of its mandates on the lives of the ordinary Filipinos.
"Twenty billion pesos going to the stomachs of 60-70 million Filipinos is certainly a low price to pay for a government that is sensitive and responsive to its social role of assuring enough food for its people at all times," Tan said.
He emphasized that deregulating rice, which is the basic staple of 85 percent of Filipinos, could spawn worse problems than what the country experienced after the deregulation of oil several years ago.