The Marcos administration’s imposition of a price cap on rice and new prices for palay as well as its subsidy for rice retailers could be “costly” to the government, according to resigned finance undersecretary Cielo Magno.

The government can ill afford the costs arising from the three policy packages because these are not part of its programmed expenditure, and come on top of the P133-billion budget deficit, Magno said.

“We’re trying to manage the deficit. So with a limited fund, we should make sure that the policy we’re implementing is very effective. It should be cost-effective,” she told CoverStory.ph editors and staff in a recent interview.

Magno was “forced to resign” after venting her frustration with the imposed price ceiling on rice on her Facebook account on Sept. 2. Her post of a textbook graph depicting the concept of a price ceiling so riled Malacañang that she was shown the door.

Her boss, Finance Secretary Benjamin Diokno, had tried to make light of it, saying that Magno was merely “on secondment” from the University of the Philippines’ School of Economics, where she enjoys security of tenure. But Executive Secretary Lucas Bersamin minced no words, saying that Malacañang terminated her appointment because she was unsupportive of the administration.

No consultation

Magno acknowledged that the three policies were “populist.” But she corroborated Diokno’s statement that the Department of Finance (DOF), specifically the Fiscal Policy and Monitoring Group which she headed until she quit, was not consulted on the price ceiling.

“For me, it’s a major concern that a major economic policy was issued but the economic managers were not consulted. At the time I was already reflecting: Is it time to go?” she said.

On Aug. 31 President Ferdinand Marcos Jr. issued an executive order capping the prices for regular-milled rice and well-milled rice at P41 and P45 per kilogram, respectively, supposedly to mitigate the alarming “increase” in retail costs and to stop hoarding. This order took effect on Sept. 5.

Mr. Marcos subsequently said the rice price ceiling could be lifted once the market price stabilizes—which can happen after the harvest season.

P2B for subsidy …

Meanwhile, the Department of Social Welfare and Development (DSWD) announced the distribution of P15,000 in cash aid to each of the small rice retailers in public markets and in family-run sari-sari stores to compensate for their losses from the price cap.

Per the DSWD, it has released P92.415 million to 6,161 of the 8,390 targeted micro retailers. Certain sari-sari store owners were quoted in news reports on Thursday that they had yet to receive the subsidy.

The House of Representatives had earmarked P2 billion from the national budget for the cash assistance to retailers.

P15B for dry palay

The National Food Authority (NFA) also set new buying prices for palay: P19 to P23 per kg for dry palay and P16 to P19 for wet palay.

The agency said procuring dry palay at P23 per kg would cost the government P15 billion.

“It’s very costly to the government,” said Magno, who has gone back to her teaching job at the UP School of Economics.
Magno said setting a price cap on rice may yet achieve the opposite, and lead retailers to sell “adulterated rice” in the market by mixing regular-milled rice with a poor variety.

Subsidizing the retailers would have been “unnecessary” if there were no price caps in the first place, she pointed out.

Import tariffs

If at all, Magno said, import tariffs on rice could be reduced to allow the importation of affordable rice and ensure sufficient supply in the country.

But “the tariff should only be used as a flexible strategy,” she said.

The DOF and the National Economic and Development Authority have proposed a temporary reduction of import tariffs to ease the rice prices.

But some farmer groups have raised concern about its negative impact on them. They argued that this would only “further depress” palay prices and discourage farmers from expanding their future production. They added that importers stood to gain from this plan.

On Tuesday, the President rejected the proposal, citing the downtrend of rice prices in the world market. “This is not the right time to lower tariffs. Tariffs are generally lowered when the price is going up,” he said.

Mr. Marcos serves as agriculture secretary in a concurrent capacity. He has rejected calls for him to appoint a permanent secretary to focus on the agriculture sector, a prospect seen to allow him wiggle room to run the affairs of the state.

Foresight

For Magno, government “foresight” is key to addressing the issue.

“Planning in the agriculture sector is very important because that is influenced by the weather. When it rains, there’s an effect. We must have foresight when to import or store rice,” Magno said.

This is why the NFA plays a very crucial role in ensuring that the country has sufficient supply of affordable rice, she said, adding:

“In terms of strategy, you have support to improve the productivity of farmers. In terms of affordability, we have targeted intervention through social programs. And we have the flexibility of tariff to import affordable rice in case of short supply.

“That combination is there. We only need foresight.”

See: Tarlac rice farmers, retailers suffering losses due to price cap