Aquino admin wants rice subsidies stopped

The Aquino administration wants to stop subsidizing the price of rice – the staple food of Filipinos – and start selling the commodity at prices determined by market forces. The decision, according to the Finance Department, is part of broader efforts to reform the fiscal sector, stanch the bleeding of government corporations, and narrow the chronic budgetary shortfalls in three years. Finance Secretary Cesar Purisima first talked of the new strategy last week, but department technocrats said Wednesday the policy decision was made to stop the practice of buying rice from overseas at market-determined prices only to sell them to Filipino consumers at a loss. “We will emphasize the need for reforms and the need to unbundle the functions of the National Food Authority to regulate rice prices, warehouse the grains, and sell them at support prices for the poor," Finance Undersecretary Gil Beltran said in an interview. Such reforms will require legislation for the NFA to abandon its regulatory role and let market forces determine prices while the agency continues to operate the country’s warehouses for grains. As part of the plan, the Department of Social Welfare and Development would undertake a conditional cash transfer program for eligible recipients or the poor, Beltran said. As such, Beltran said that rice would be sold at market prices poor with the poor getting money from the program. The department has started drafting a memorandum for President Benigno Aquino III on the merits of ending decades of rice subsidies that impoverish government. “The cutting of the subsidies on rice will require changes to the charter of the NFA. We will certainly need the help of Congress to do that," Beltran said. Purisima earlier ordered the Commission on Audit to probe how the NFA racked up debts totaling P171.5 billion as of Dec. 31, 2010 when its debt burden three years earlier totaled only P40 billion. “We need to understand how this happened so we can avoid this in the future," Purisima said. Asked about the implications of the review on monetary policy, Bangko Sentral Deputy Gov. Diwa C. Guinigundo said in a text message, “I am not really sure. What will be relevant is the outcome of that audit." Guinigundo believes in the efficiency of markets in setting commodity prices, like that of rice that form part of the consumer price index. Inflation rate slowed down to 3.9 percent in June, from 4.3 percent in May. There were indications the inflation rate will average near the low end of the 3.5 percent to 5.5 percent range forecast this year, Guinigundo said. —VS, GMANews.TV