ADB holds release of grains sector loan

A major disagreement over the incentive fees that the National Food Authority (NFA) grants to farmers during grains procurement has caused a delay in the release of the second tranche, amounting to $30 million, under the Asian Development Bank’s grains sector development package (GSDP).

The second tranche was due for release last month but remains undisbursed to this day because the ADB and the NFA could not agree on the amount of grains procurement incentives granted to farmers.

The NFA buys palay from farmers at P10.50 a kilo during the dry season and P9.50 a kilo during the wet season. The actual amount of incentives given by NFA, and which the ADB wants scrapped, is 50 centavos consisting of 10 centavos for delivery fee, 15 centavos for drying fee and 25 centavos for cooperative development incentive fee (CDIF).

The ADB in particular wants the 25-centavo CDIF removed because it discriminates against the individual farmers who want to sell their produce directly to the NFA and are thus not entitled to it.

Also, the ADB wants to make Philippine palay prices at par with those of its neighbors in Asia, particularly Vietnam.

The NFA, which is chaired by Agriculture Secretary Leonardo Q. Montemayor, is asking the ADB to retain the CDIF which has been in effect for the past 15 to 18 years and is considered very vital for the institutional build-up of cooperatives in the country. Saying that compliance is forthcoming, the DA has asked ADB to proceed with the release of the second tranche.

Another condition attached to the ADB loan involves the more emotional issue of privatizing the NFA by separating its trading function from its regulatory function. The assets related to the trading function can either be packaged and sold to the private sector or to a corporation that will be formed to operate as such.

Left with only the regulatory function, the NFA can now be made into a grains policy-making body or council whose members may be part-time executives and officials of the DA, explained ADB grains program consultant Bruce Tolentino who was once undersecretary for policy and planning at the DA.

Tolentino said the GSDP comes in two loans worth a total of $175 million. The first is a $75-million loan to finance investments in irrigation, advanced rice and corn production technology and improved capacity in policy and planning.

The other component, $100 million, is for general budget support to be released in three tranches contingent to policy and institutional reforms aimed at expanding private sector participation in rice marketing, improving the efficiency of NFA, implementation of key aspects of the food security program and targeting of food subsidies to the poor.

The $175 million will be disbursed over a five-year period, or from 2000 to 2005. The first tranche ($30 million) was released in August 2000. The second ($30 million) was due for release last month but was delayed with no definite date set as of now. The third tranche ($40 million) is scheduled for release in February next year.