NFA lost P2 B selling rice to private traders COA

MANILA, Philippines – A Commission on Audit report for 2005 showed that the National Food Authority (NFA), which is not authorized to sell rice to private traders, sold more than seven million bags of rice that were imported from Vietnam, Thailand and Pakistan at a staggering loss of more than P2 billion.

The COA said the huge loss was incurred “as a result of giving undue advantage to affluent rice traders through subsidized selling prices, instead of the poor consumers.”

“By any stretch of the imagination, it is not difficult to conclude that these affluent awardees/buyers/traders are not deserving of subsidy from the NFA,” it said.

While state auditors found several irregularities in the auctions, there was no suggestion on their part that there was collusion between NFA officials and the beneficiary-traders to defraud the government.

Agriculture Secretary Arthur Yap said yesterday the amount is the subsidy cost to the government for selling NFA rice in the public markets.

“This is the same subsidy government is now paying for by selling rice in the markets at P18.25,” he said.

The COA findings have been submitted to the Senate and the House of Representatives, together with the latest report for 2006, which did not mention any sales to traders for that year.

The 2005 report showed that the NFA conducted seven public auctions to sell imported rice between April 12 and July 22.

It auctioned off a total of 8.6 million 50-kilo bags, though as of Dec. 31, 2005, only 7,181,702 bags had been withdrawn from NFA warehouses and presumably disposed of by the winning bidders at a huge profit.

The COA valued the withdrawn stocks at P8,846,823,927, but these were sold only for P6,712,493,513 based on the winning bids, or a staggering loss of P2.13 billion.

It said while the NFA had resolved to recover the full cost of importation, including freight and insurance, it later inexplicably sold at a loss.

“In essence, the NFA subsidized the winning bidder, since not all the costs in acquiring the imported stocks were recovered. It also turned out that the immediate beneficiaries of the NFA were no longer the low-income consumers of rice, but rather the more affluent and enterprising group in the grains industry,” the COA reported.

It noted that the winning bidders were not the ones who withdrew their stocks but designated other persons to do that job for them.

“There were cases where several winning bidders authorized only one and the same person, which is indicative of sale before withdrawal (of stocks),” it said.

It said even farmers’ organizations, which were allotted 20 percent of the volume auctioned or about 1.7 million bags, sent other persons to get their stocks.

The NFA also failed to confiscate 10 percent of the bidders’ performance bonds, as prescribed in the terms of the auction, despite their failure to pay for their stocks in full within the agreed deadline.

COA also questioned the awarding of more than 95 percent of the volume auctioned (8.2 million bags out of 8.6 million) to bidders who offered prices lower than the highest offer for each of the seven auctions.

It said the government would have earned an additional P248.2 million had the stocks been sold to the highest bidder or had other bidders been required to match the best bid.