Statement of Senator Cynthia Villar On the Issue of NFA and Rice Tariffication Law

PHILIPPINES, April 22 - Press Release
April 22, 2025

STATEMENT OF SENATOR CYNTHIA VILLAR
Chairperson Senate Committee on Agriculture Food and Agrarian Reform
On the Issue of NFA and Rice Tariffication Law

Under the Rice Tariffication Law (RTL), the idea that rice traders have no competition when buying palay from local farmers is INCORRECT.

In fact, the Rice Tariffication Law or RTL created mechanisms to strengthen competition and empower local farmers.

First, while the National Food Authority (NFA) no longer controls rice imports due to the liberalization of rice importation with tariff, it is still mandated to maintain a buffer stock sourced solely from local farmers (Section 8, RA 11203). This means the NFA continues to directly buy palay from domestic producers, especially during harvest seasons, which helps stabilize farmgate prices and offers farmers another market aside from private traders.

Second, to support farmers and reduce their dependency on traditional rice traders, the government has significantly expanded rice processing infrastructure. Through the Rice Competitiveness Enhancement Fund (RCEF) under the Rice Tariffication Law (RTL), rice farming cooperatives are being equipped with modern machinery and post-harvest facilities. So far, 151 farmer cooperatives across the country have been provided with equipment for drying and milling rice. Of these, 41 facilities are already operational, 16 are awaiting delivery, and the remaining units are currently undergoing installation and testing. Once fully operational, these facilities will have a combined milling capacity of 2.06 million metric tons per hour, substantially boosting farmers' ability to process and market their own produce. This move is expected to enhance competition in the rice market, improve price transparency, and empower farmers to retain more value from their harvests by reducing reliance on middlemen.

These new facilities will complement the existing infrastructure of the National Food Authority (NFA), which currently operates 22 milling and 116 drying facilities nationwide.

Why Restoring the NFA's Mandate to Stabilize Rice Prices Is Not Necessary -

1. Limited Impact on Market Prices The NFA's rice distribution program historically had little influence on rice prices. From 2010 to 2017, it only accounted for about 8.5% of national rice consumption—a small share that wasn't enough to affect overall market prices. By early 2018, this share dropped to just 2.1%. Despite efforts, rice inflation continued to rise, showing the NFA's limited capacity to stabilize prices.

2. Inefficiencies in Targeting and Distribution The NFA has struggled to get rice to the families who need it most. Only about 27% of poor households benefitted from NFA rice, while nearly 68% of recipients were non-poor. This poor targeting led to significant "leakage," especially in areas like Metro Manila, where up to 91% of the rice meant for the poor went to others. Without proper systems for targeting and monitoring, NFA distribution ended up being inefficient and inequitable.

3. Importation Failures and Risks NFA-led rice importation has also proven ineffective and costly. In 2013, poor planning resulted in rice inflation surging above 11%. In 2018, NFA pushed for government-to-government (G2G) importation to address shortages, but delays and lack of transparency worsened the problem—over 42,000 metric tons of rice remained undelivered by August, contributing to further price hikes.

4. Mounting Debt and Losses In 2017, the NFA's outstanding debt ballooned to over ?152 billion, largely due to its strategy of buying rice from local farmers at high procurement prices and selling it to the public at subsidized rates. This "buy high, sell low" model caused chronic operational losses year after year.

The NFA also incurred costs due to poor inventory management, including rice spoilage, overstocking, and unnecessary storage expenses. In one instance, the Commission on Audit reported rice stocks left to rot due to over-importation and delayed distribution—highlighting not just financial waste but operational incompetence.

While the intent to stabilize rice prices and support Filipino farmers is commendable, restoring the National Food Authority's (NFA) previous powers to import and distribute rice is not the most effective or sustainable solution. In fact, under the Rice Tariffication Law (RTL), and its recent amendment through Republic Act No. 12078, mechanisms are already in place to support local farmers, protect consumers, and ensure food security—without repeating the costly and inefficient practices of the past.

On December 9, 2024, President Ferdinand R. Marcos, Jr. signed Republic Act No. 12078, which amended and extended the Rice Tariffication Law or RA11203. The new RTL strengthened the regulatory functions of the Department of Agriculture (DA) by authorizing it to require the registration and inspection of all grain warehouses and facilities, re-establishing the DA's ability to stabilize the rice market by purchasing local and imported rice during rice supply shortages or sharp rice price hikes.

The new RTL increase the Rice Competitiveness Enhancement Fund (RCEF) from Php10billion to Php30billion until 2031 to fund the rice industry support programs, geared towards increasing competitiveness of the rice sector.

The RTL was passed after long and tedious consultation and deliberations with stakeholders in both Houses of Congress and was overwhelmingly passed in the Senate with 23-0 votes.

As in the previous RTL, the DA, through the Bureau of Plant Industry (DA-BPI), is authorized to require the registration and maintenance of a national data base of all grain warehouses, storage facilities, silos and cold storages. The DA-BPI is also authorized to conduct regular inspections of these grain warehouses to ensure compliance with palay and rice quality and supply standards.

The DA Secretary upon recommendation of the National Price Coordinating Council (NPCC) shall declare food security emergency related to rice due to a supply shortage, or extra ordinary increase in rice prices.

The DA is authorized to sell existing NFA rice buffer stocks in such areas to -
a. Government agencies or entities such as the DSWD, Dept. of Civil Defense - National Risk Reduction and Management Council, and LGUs;
b. Replenish the used NFA rice buffer stock with locally produced rice from farmers and farmer cooperatives or import rice when the local supply is inadequate.

The DA Secretary is authorized to designate an importing entity within the DA with the exception of NFA. The importing entity shall import rice at the least cost available among government - to - government options, which include direct contracts between the Philippine government and foreign governments.

The DA shall maintain a buffer fund for food security emergencies on rice amounting to FIVE Billion Pesos from any current unutilized portion of the DA budget. Provided, any excess annual tariff collection from importation of rice not exceeding Two Billion Pesos shall be credited to the buffer fund, Provided, further, the proceeds of the sale shall revert to the DA rice buffer fund.

The DA Agribusiness and Marketing Assistance Service (DA-AMAS) has KADIWA Retail Selling Program which creates a direct producer-to-consumer food supply system by-passing the conventional trader dominated marketing chain in partnership with government institutions, LGUs, private sector by connecting farmers and farmer coops and associations to sell their products in markets, trade fairs by providing selling areas for free aside from training them on entrepreneurship.

On the side, President Ferdinand Marcos Jr. on October 2024, signed RA No. 12022 or the Anti- Agricultural Economic Sabotage Act, which classifies agricultural smuggling, hoarding, profiteering, and engaging in a cartel as economic sabotage.

The President is empowered, for a limited period and/or specified volume, to authorize rice importation at a lower applied tariff rate to address imminent or forecasted rice supply shortages, or any other situation requiring government intervention. The President's order shall take effect immediately and can only be issued when Congress is not in session.

In the event of excessive supply of imported that result in extraordinary decrease in local prices, the President may suspend or prohibit further importation, for a limited period and/or a specified volume, until both supply and prices stabilize.