Economist warns of impending tight rice supply
At A Glance
- A veteran economist expresses concerns about an impending tightened rice supply if price ceilings are enforced for too long.<br>Former Finance Undersecretary Gil Beltran said price controls offer short-lived advantages but can lead to supply depletion and retailers dropping out.<br>Implementation of Executive Order No. 39 enforces price limits for rice. Retailers violating price caps may face fines of up to P1 million.<br>Beltran said long-term price controls can lead to supply disappearance and further price increases. <br>Government is now contemplation of lowering import tariffs on rice as an alternative approach. But Beltran suggested to implement higher tariffs during harvest months and lower tariffs during lean months.<br>Finance Secretary Benjamin Doiokno said artificially low rice prices for a prolonged period can have negative effects, such as decreased rice supply, discouragement of farming, and importers refusing rice imports.
A veteran economist has expressed concerns about an imminent tightness in rice supply within a month if the government enforces price ceilings for too long.
Gil S. Beltran, a former undersecretary and chief economist at the Department of Finance (DOF), stated that price controls typically provide short-lived benefits that cease once the supply is consumed.
“If it goes beyond one month, the supply will be depleted,” Beltran told Manila Bulletin. “The danger is that some retailers may drop out because of the risk of fines.”
Effective last Tuesday, the implementation of Executive Order No. 39 has enforced price limits for rice, with regular-milled rice capped at P41 per kilo and well-milled rice at P45 per kilo.
The Department of Trade and Industry said rice retailers who violate these government-mandated retail price caps may face fines of up to P1 million.
“At present, there is a supply available. However, in the long run, that supply will disappear due to the influx of people seeking it,” Beltran said.
The implementation of rice price ceilings has led to a surge in consumer demand, with people flocking to local markets to purchase cheaper rice.
While consumers reaped the benefits, rice retailers faced substantial financial challenges due to the implementation of price ceilings.
Beltran said price controls provide relief, but their effects are short-lived.
“Supply will disappear if it’s long term, and if there is no more supply, the prices will increase even more,” he said. “The problem they are trying to solve will worsen further."
Beltran, who served the DOF for over four decades, said the government typically implements price control measures only in the aftermath of disasters when the supply of goods is not readily accessible.
National Economic and Development Authority Secretary Arsenio M. Balisacan earlier said that imposing a cap on rice prices is a short-term solution aimed at combating dishonest traders.
Balisacan also said the government is contemplating the possibility of lowering import tariffs on rice.
Beltran agreed that lowering import tariffs is a more favorable approach than implementing price ceilings. However, he also suggested that the government should explore an additional option.
"It's better to have a higher tariff during the harvest month and a lower tariff during the lean months, like right now, because prices are increasing locally,” Beltran said. “That's actually a better option.”
However, he said, “They need to pass a law to amend the tariff and customs code.”
Last Sept. 5, Finance Secretary Benjamin E. Diokno warned that keeping rice prices artificially low for a long time could have negative effects.
“Price control works only in the near term,” Diokno said. “If allowed to linger for longer it leads to some unwanted consequences.”
Diokno cautioned that it would lead to a decrease in the supply of staple food, discourage farmers from planting, and cause importers to refuse rice imports.