State-owned think tank Philippine Institute for Development Studies (PIDS) said it is important for the government to provide income support for farmers to offset the negative impact of the lifting of the quantitative restrictions (QR) on rice next year.
PIDS recalled that in 1995, the Philippines was granted special treatment in rice, which allowed the country to maintain its import monopoly and QRs.
“The expiration of this privilege in 2017 signals a greater competition from imports and the decline in domestic prices, which will reduce farmers’ income,” it said in a policy note presenting an assessment of agricultural support options for rice farmers upon the lifting of the special treatment.
The think tank said baseline scenario shows that domestic output will increase, yet not enough to meet higher demand. Imports will be doubled, from 1.074 million tons in 2014 to 2.17 million tons to 2.26 million tons annually.
For the alternative scenario, the QR lifting with a 35-percent tariff will lower palay prices by P4.56 a kilogram (kg) and P6.97/kg at the farm gate and retail level, respectively.
“From an average of 2.2 million tons in the baseline scenario, imports will be doubled, reaching 4.4 million tons,” it said.
Meanwhile, PIDS said that based on the payment compensation formula, payments equal P17 billion to 18 billion annually, lower than the projected annual tariff revenues at P27 billion to 28 billion.
“Hence, earmarking the rice tariff revenue to pay for the compensation scheme is a feasible funding strategy. Residual money from the tariff revenues could be used for other product-enhancement measures for rice farmers,” it suggested.
Assuming eligible area is at 4 million hectares, payments per hectare is equal to P4,750. In this case, for 2 hectares of irrigated farmland, farmers could receive P19,000 per year, it added.
The think tank said this is greater than transfer per household from the conditional cash transfer (CCT) program, which is P15,000 for three children.
To conclude, PIDS said tariffication of the Philippine rice sector by 2017 is inevitable.
“Since our analysis suggests massive fall in domestic prices, it is imperative to provide farmers a measure for income support,” it said.
“We have evaluated a compensatory transfer scheme combined with a 35-percent tariff equivalent as a possible support,” it added.
PIDS said assessment showed that the compensatory transfer scheme can operate at a feasible cost, with 35-percent tariff rate applied.
“The scheme is also a Green Box measure as it is not linked to production decisions. It should be reiterated that the compensatory scheme aims not to displace existing programs, but as a supplementary measure to be nanced from rice tariff revenues,” it added.