Contrived

After many days of warning us this was coming, the Department of Agriculture declared a “food security emergency on rice” last Monday.

We are told this will be in effect for only a short period. It will very likely be ineffectual.

The emergency will not solve our chronic inefficiency in rice production. It will not bring about a Green Revolution. It will not deliver the P20 per kilo rice PBBM promised during his campaign. It will not even break up the trading syndicates said to have made billions by pocketing the proceeds from the reduction in rice tariff rates rather than passing on the benefit to consumers.

At the moment, we face no rice shortage – thanks to the liberalization of rice trading. The spike in rice prices happened this time last year. Today, with a global bumper crop, rice prices are in fact softening.

An “emergency” such as was declared this week may be justified only under two conditions: when there is a shortage of the staple and when prices are spiking uncontrollably. Neither applies today.

This is a contrived “emergency.” It is intended to accomplish only one thing: to provide a cover for the NFA to sell rice stocks at artificial prices to LGUs and the Kadiwa operation.

Without this cover, the NFA is required to dispose of its excess stocks through a public auction. This rule is an anti-corruption measure.

With the “emergency,” the NFA may now sell its stocks at a politically determined price. This throws every market discipline out of the window. Government determines prices as in a centrally-planned economy.

The NFA will now sell about 150,000 tons from its reserves at an artificially low price. This will result in a massive loss for government – and, eventually, for all taxpayers.

This loss-producing negotiated sale is actually a cross-subsidy. The actual loss becomes calculable when the time comes for the NFA to replenish its buffer stock. Since our government already operates on a deficit, the financial loss will convert into additional borrowing. Therefore, it will be charged to our children.

Why commit this fiscal irresponsibility? For the circus of it all.

The administration is facing rapidly eroding job approval ratings in large part due to high food prices. It is desperately trying to stop the bleeding by creating artificial rice prices, possible only through a complex web of subsidies.

This whole operation intends to create the semblance of cheap rice –  without the slightest improvement in our agricultural productivity. Our consumers are expected to play along by pretending to believe in magic.

Unfortunately for the masters of this circus, 150,000 metric tons of rice will not last for very long. The artificial prices cannot hold. Economic reality – especially the cruel neglect of our agriculture – will bite again in a few weeks. The meager political gains to be made here will vanish like the chimera it truly is.

Then we are left with same mess – with wasted subsidies added.

Delayed

Over the past decade or so, the Energy Regulatory Commission (ERC) took its sweet time in issuing rulings on petitions for rate resets submitted by the heavily regulated energy entities. The result was a pile-up of rate reset petitions – including those reducing prices to benefit consumers.

The delays took many years. All the missed opportunities result entirely from the sloppiness of our regulators.

Most of the petitions for rate reset were eventually granted after literally years of delay. The benefits consumers might have won years ago must now be delivered through tedious refunds running over many months. Refunding is added operational cost to energy companies – such as Meralco and the NGCP most recently. It cuts into the price benefits consumers might have enjoyed had the ERC worked more efficiently.

Regulatory incompetence caused delays and multiplied costs. That is now water under the bridge – unless we impose massive fines on members of the errant ERC, whose chair was suspended by the ombudsman last year precisely for the delays.

Although regulatory incompetence is clearly the reason for the delays, our brilliant congressmen have organized yet another public hearing. They summoned the energy companies, seemingly treating them as the culprits rather than the victims.

In this tone-deaf effort, in part brought about by a privilege speech delivered by the now famous Rep. Dan Fernandez, the congressional panel sought the advice of a former ERC commissioner. Strangely, this retired regulator was the main cause of the delays during the time he sat at the ERC. The retiree now enjoys the fat pension his former position grants.

Among the things the hearing wants to establish were the “effects of the failure to conduct rate reset by the ERC.” These include the “confirmation and true-up process, the probable involvement of government officials whether through negligence or fraud and possible connivance with other market players, whether there was over-collection of electricity fees, including refund of collected fees using the unadjusted rate, to electricity consumers, among other issues.”

Despite the length of the quoted sentence, it overlooked one vital detail: the energy companies cannot alter the rates they charge, even when they have become too high, until the ERC rules on their rate reset petition. The power sector is a completely regulated industry.

Therefore, all the congressmen have to do is to interrogate only the ERC. We don’t need another congressional sideshow.