Removing tariff on flour won't benefit consumers, millers say

MANILA, Philippines – The removal of the tariff on flour will reduce the prices of pandesal and loaf bread only slightly but will mean P1.3 billion in foregone revenues for the government, the Philippine Association of Flour Millers said (PAFMIL).

“The only people who would benefit from the removal of the seven-percent duty are the traders. Consumers will not be able to feel 45 centavos mark down for loaf bread and two centavos for pandesal,” PAFMIL executive director Ric Pinca said.

He said the tariff removal would only further weaken the market position of local flour against imported flour.

“Obviously, removing the seven percent tariff would not benefit the consumer at all. Only the traders importing Australian, Chinese and other flours will benefit from tariff reduction. Not the consumers. Not the government,” Pinca explained.

Big bakers have asked the Tariff Commission (TC) to consider removing the seven percent most favored nation or MFN as well as the five percent AFTA (ASEAN Free Trade Area) tariffs on flour, citing the increasing cost of raw materials.

Pinca noted that at five percent tariff, the value of Chinese flour is at P1,175 per metric ton. Given that a ton of flour produces 40 bags of flour of 25 kg each, the net savings per bag if duty is removed stand at P29.40.

One bag of flour produces 80 loaves of bread of 550 g each. The net effect per loaf of the tariff reduction is therefore only 37 centavos.

For pandesal, Pinca said the net savings total only 0.016 centavos.

“Would the consumers be happy if the government announces that their P55 loaf of bread would now cost only P54.63 and that their P3 pandesal would now cost only P2.984?” Pinca asked.

He said the P1.3-billion foregone revenue figure is based on the 2007 estimated importation of two million metric tons of wheat and 150,000 metric tons of flour.

In a letter to TC Commissioner Edgardo Abon, Pinca said the lower priced imported flour already enjoys competitive advantage over locally produced flour and that removing the tariff would exacerbate the situation for local producers.

He warned that the situation would heighten the country’s dependence on imported wheat flour.

“That would mean the end of our food security,” Pinca said.

The TC held a public hearing on the proposed removal of flour and wheat tariff last Sept. 26. It has yet to issue a ruling.

The proposal was made by the Philippine Baking Industry Group, Filipino Chinese Bakery Association Inc. and the Philippine Federation of Bakery Associations Inc.