MANILA, Philippines—Huge rice imports and a policy of buying high, selling low and storing long have resulted in the National Food Authority (NFA) losing more than P100 billion in a span of 10 years, the Commission on Audit (COA) said.
In a 2009 report on the NFA, which was released recently, the COA said the agency’s massive losses happened despite government subsidies.
The audit agency said proceeds from the NFA’s sale of rice and collection of fees were not enough for its operations, prompting it to resort to borrowings to finance operations and pay obligations.
The COA wondered how the NFA could continue to operate without any support from the government.
“With NFA’s increasing liabilities and big losses, we doubt the capability of NFA to pay its debts and continue its operation without intervention from the national government,” it said.
The NFA is tasked with maintaining a sufficient rice reserve to prevent a shortage of the country’s staple. It may procure palay (unmilled rice) in the country or import rice.
From 2000 to 2009, net losses of the NFA amounted to P100.921 billion, while it received P33.748 billion in subsidy.
Biggest net loss
The NFA incurred its biggest net loss in 2008 when the country was faced with soaring rice prices amid a global grains shortage. It lost P32.208 billion that year.
The agency sold imported rice to the public at huge discounts.
In 2009, the NFA incurred its second biggest loss at P26.421 billion.
Its third biggest loss was incurred in 2006 (P10.976 billion), followed by 2003 (P6.663 billion), 2004 (P6.470 billion), 2005 (P5.122 billion), 2000 (P4.281 billion), 2002 (P4.121 billion), 2007 (P2.898 billion), and 2001 (P1.757 billion).
The COA recommended that the NFA do its best to maximize income and minimize expenses to reduce losses.
The audit agency also suggested that the NFA reevaluate its plans and programs for the next five years.
Part of mandate
The NFA, for its part, told the COA that its policy of buying high, selling low and storing long—which is causing the rice trading agency to operate at a loss—was part of its social mandate to help farmers and ensure the country’s security and stability in its staple food.
The NFA said that aside from its losses from trading, it was losing money due to the interest costs stemming from insufficient subsidy from the government.
The NFA was allowed to borrow from financial institutions so that it could sustain its programs and ensure a buffer stock, the rice trading agency added.
The NFA also said it had regularly asked the government’s economic managers to increase the selling price of rice in order to reduce its loss or at least allow it to break even. However, its requests have been turned down.
Spillage
The COA said that in 2009, the NFA lost 7.79 million kilos of rice due to short-landing spillage in unloading and transfer of stocks from one warehouse to another. The book value of the lost rice was placed at P225.51 million.
The losses were reported in eight regional offices, and the bulk of the loss was reported in Metro Manila.
Metro Manila lost 4.045 million net kilos worth P124.587 million. This was followed by Region 5 which lost 1.65 million kilos worth P44.031 million.
Region 7 lost 1.086 million kilos worth P30.067 million; Region 11, 745,762 kilos worth P19.649 million; Region 4, 126,856 kilos worth P3.766 million; Region 9, 112,181 kilos worth P2.953 million; Region 2, 10,543 kilos worth P75,352; and the Caraga region, 12,319 kilos worth P379,488.
The COA also noted that the NFA could not recover the losses from rice suppliers because, based on the purchase contract, the bill of lading weight, the quality and condition of rice stocks and polypropylene bags and packing should be final at the port of loading as inspected and certified by the buyer’s load port surveyor.
Claims against ships
The audit agency said the NFA should think of other remedies that would help it recover losses, such as amending the repurchase contract. The rice agency should also file claims against the owner of the ships.
The NFA, for its part, said that its Metro Manila office had already filed a letter of protest to seek the settlement of short-landed deliveries from the local shipping agents of the supplier.
It also said that it had begun a move to revise the contract in which the quantity, weight and quality would be considered final at the destination, and to blacklist ship owners who failed to deliver a big portion of the shipment.
But the NFA said that it would have to shell out more money for hiring a surveyor at the loadport and at the disport.
It said that when there were short-landed deliveries and losses that were beyond the 0.28 percent tolerable allowance while in transit, these were automatically deducted from the freight claims of the trucking contractor.