Gov't extends P23 B in subsidies to NFA

The government has extended P23 billion in subsidies to state-owned National Food Authority (NFA) during the first eight months of this year for the grains agency’s operations.

Budget Secretary Rolando Andaya revealed that total government subsidies granted to NFA has already amounted to P23 billion. The amount is nearly thrice the original programmed subsidy of only P7.5 billion.

Nevertheless, fiscal authorities said the government is inclined to cut the subsidies to the agency eventually and instead increase the funds given to other sectors.

Socioeconomic Planning Secretary Ralph Recto has said that there was a need to cut the subsidies given to the NFA so the government could expand its cash transfer program.

The Department of Finance (DOF) said the government is inclined to pursue such direction next year by lowering the rice importation volume of NFA and expanding its domestic production.

The government would be better off not intervening in the market, Finance department sources have said.

As such, the government is inclined to increase the subsidies given to other sectors.

Recto said the government should go slow in giving huge subsidies to NFA, saying that it would be more beneficial to increase the subsidies given to other sectors such as the unemployed, the senior citizens and to the educational sector.

The interagency Fiscal Incentives Review Board (FIRB) had approved an increase in the Tax Expenditure Fund (TEF) of the NFA.

The so-called TEF is a subsidy released by the Department of Budget and Management (DBM) to government-owned and controlled-corporations and state-run companies mainly to settle customs duties and other taxes arising from the importation of goods.

The government has programmed a TEF for the grains agency of only P7.5 billion for 2008 but NFA expects its TEF needs to increase to as much as P32 billion or more than four times the programmed amount.

The subsidy enables NFA to continue with its operations and fulfill its mandate of selling rice at a cheaper price than the prevailing market rates. It also helps the grains agency to have more funds for its import requirements.

Providing tax subsidy to the NFA is the more favored mitigating measure instead of reducing the tariffs on rice.

Last year, the NFA incurred a deficit of P2.6 billion due to its mandate to sell rice below market prices.