A Cure for the Rice Sector Ills, Understanding the Debate Around the Rice Tariffication Law (RTL)
Why in News
Agriculture Secretary Francisco Tiu Laurel Jr. recently issued a strong warning regarding the impact of the Rice Tariffication Law (RTL) on the rice industry, noting that what was once hailed as landmark legislation now “threatens to kill” the sector. During a Senate committee hearing on agriculture, food, and agrarian reform, he appealed for amendments to Republic Act No. 11203, originally signed into law in 2019 by former President Rodrigo Duterte and later amended in December 2024 by President Ferdinand Marcos Jr. The proposed amendments focus on restoring the regulatory and supervisory functions of the National Food Authority (NFA) in the rice industry.
Introduction
The Rice Tariffication Law was passed in 2019 with noble intentions. It aimed to stabilize the rice supply, reduce retail prices for consumers, and uplift farmers by improving productivity through investments in farm mechanization, seed development, and credit assistance. The law replaced quantitative restrictions on rice imports with tariffs, allowing the private sector to freely import rice.
The revenue generated from tariffs was earmarked for the Rice Competitiveness Enhancement Fund (RCEF), which was allocated to help farmers modernize and increase efficiency. On paper, the law was designed to create a win-win scenario: consumers would enjoy cheaper rice while farmers would benefit from improved competitiveness.
However, the implementation of the RTL has been marred with issues. Instead of benefiting farmers and consumers, much of the law’s gains have been absorbed by middlemen and traders, leaving both ends of the supply chain dissatisfied.
Key Issues and Background
- Failure to Increase Farmers’ Income:
The RTL was supposed to improve farmer productivity by investing in mechanization, quality seeds, credit, and training. However, reports reveal that disbursement of funds has been slow and inefficient. A 2023 Commission on Audit (COA) report showed that the Philippine Center for Postharvest Development and Mechanization (PhilMech) only disbursed 44% or ₱2.97 billion of its ₱7.8-billion budget in 2022. This shortfall meant many farmers did not receive the promised assistance. - No Significant Drop in Retail Prices:
While rice imports helped stabilize the overall supply, retail prices did not drop as expected. Data from the Philippine Statistics Authority (2017–2020) showed that although wholesale rice prices decreased after the enactment of RTL, retail prices for consumers remained high. This indicates that traders and middlemen pocketed most of the gains instead of passing them on to consumers. - Rise of Middlemen Power:
Farmers and consumers were supposed to be the main beneficiaries of the RTL. However, the Federation of Free Farmers (FFF) has long argued that middlemen became the biggest winners, acting as intermediaries who manipulate rice prices for their own benefit. Their dominance has resulted in price manipulation and even fraudulent activities such as the rice repacking scam uncovered in Bulacan, where old rice was mixed with imported rice and sold as new. - Weak Regulatory Oversight:
With the full liberalization of rice imports, the Department of Agriculture (DA) and the NFA lost much of their power to regulate the industry. Secretary Tiu Laurel pointed out that this effectively “stripped us of the ability to intervene and protect this most vital of commodities.” This absence of oversight opened the door for abuses by unscrupulous traders. - Erosion of Farmer Competitiveness:
Instead of strengthening farmers, the law exposed them to stiff competition from cheaper imported rice, making it harder for local producers to survive. Without effective support and full disbursement of funds, the promise of modernization has remained largely unfulfilled.
Specific Impacts or Effects
- Impact on Farmers:
Farmers remain vulnerable, as the intended support mechanisms failed to reach them fully. Many continue to operate with outdated tools and methods, unable to compete with imported rice. Their incomes have stagnated or even declined. - Impact on Consumers:
The public expectation was that rice would become cheaper. While imports kept supply stable, retail prices in markets did not go down as much as expected. Price manipulation by middlemen has left consumers bearing the brunt of high costs. - Impact on Government Institutions:
The weakening of the NFA and DA’s powers left a regulatory vacuum. These agencies were intended to safeguard consumer and farmer interests but were sidelined by the liberalized framework of the RTL. - Impact on Rice Industry Structure:
The liberalization empowered middlemen and traders, consolidating their control over pricing. This structural imbalance undermines both farmer welfare and consumer protection. - Fraud and Corruption Risks:
The lack of oversight has paved the way for scams and fraudulent schemes, further eroding trust in the system.
Challenges and the Way Forward
- Reinforcing Regulatory Powers:
The restoration of the NFA’s authority is crucial to ensure fair trade practices, price stability, and protection for both farmers and consumers. A regulatory balance must be maintained even in a liberalized market. - Efficient Utilization of RCEF Funds:
Timely and transparent disbursement of funds for farm mechanization, seed development, and farmer training must be prioritized. Accountability mechanisms should be tightened to avoid underspending. - Addressing Middlemen Exploitation:
Stronger measures are needed to prevent price manipulation and profiteering by middlemen. This may include stricter monitoring of retail prices and supply chains. - Enhancing Farmer Competitiveness:
Beyond financial aid, farmers need long-term capacity building in sustainable farming practices, access to technology, and fair market linkages. - Consumer Protection:
Measures must be put in place to ensure that the benefits of lower import costs are passed on to consumers, not absorbed solely by traders.
Conclusion
The Rice Tariffication Law was envisioned as a transformative reform for the rice industry. However, its flawed implementation has resulted in unintended consequences that harm both farmers and consumers. The law’s failure highlights the dangers of liberalization without adequate safeguards. Restoring the role of regulatory agencies like the NFA, improving fund utilization, and protecting against middlemen exploitation are key steps toward curing the sector’s ills.
The big question now is whether the government can strike a balance between market liberalization and farmer protection while ensuring affordable rice prices for consumers. The track record so far underscores the urgent need for reform.
Five Questions and Answers
Q1: What was the original purpose of the Rice Tariffication Law (RTL)?
A1: The RTL aimed to stabilize rice supply, reduce retail prices for consumers, and enhance farmer competitiveness by investing tariff revenues into the Rice Competitiveness Enhancement Fund (RCEF).
Q2: Why did retail rice prices not decrease significantly despite the RTL?
A2: While imports stabilized the supply, middlemen absorbed most of the gains, manipulating prices and preventing reductions from reaching consumers.
Q3: How did the RTL affect farmers?
A3: Farmers were exposed to cheaper imported rice without adequate support from the government. Delays and inefficiencies in RCEF fund disbursement left many unable to modernize, reducing their competitiveness.
Q4: What role did middlemen play under the RTL?
A4: Middlemen became the primary beneficiaries, pocketing profits from cheaper imports while failing to pass on savings to consumers. They also engaged in fraudulent practices, such as rice repacking scams.
Q5: What is the proposed way forward to fix the rice sector’s problems?
A5: Key reforms include restoring NFA’s regulatory powers, ensuring efficient RCEF fund use, cracking down on middlemen exploitation, enhancing farmer competitiveness, and ensuring that consumers benefit from lower import costs.
