THIRTEENTH CONGRESS OF THE REPUBLI 
First Regular Session 
OF THE PHILIPPIINES 
SENATE 
S. No. 
207 
Introduced by Senator S. R. OsrneAa 111 
EXPLANATORY NOTE 
The NFA is guided by a policy mandate to promote the integrated growth and 
development of the entire grain sector, invariably constraining it to support the 
conflicting interests of farmers,, consumers and traders. Exercising both regulatory 
and proprietary functions over the grain sector, the NFA is responsible for setting 
import quantities while at the same time serving as the sole importer of the authorized 
volume of rice imports. This makes the NFA the biggest single competitor not only of 
rice traders but of farmers as well. 
In most of the agency’s 25 years of operation, the response has been one that 
a. Induces a depression in Ifarm prices every time the NFA sells low-priced 
imported rice in the open market; 
b. Makes the government the biggest single rice trader in the country; and 
c. Requires billions of subsidy releases from the national government. 
There is an urgent need to re-direct and attune government policies on rice and 
corn with changing market conditions in order that the private sector can appropriately 
respond and contribute to the government’s overall development goal of enhancing 
food security. Judicious use of scarce government resources becomes more relevant 
at this time when reforms towards trade liberalization call for higher efficiency and 
global competitiveness in the agricultural sector. 
This bill proposes the needed reforms to support the government’s food security 
agenda. The regulatory functions of the NFA will be discharged by the National Grain 
Council, while its 
proprietary role will be discharged by a new corporation with 
government equity. 
This will allow transparency in policy-making and in import 
transactions and the maintenance of the required buffer stock for rice and corn. 
In view of the foregoing, early passage of this bill is earnestly requested. 
e
A
 
SERGIO OSMENA 111 
Senator 


THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
I 
OF THE PHILIPPINES 
1 
“24 JgJ 39 p2 :37 
First Regular Session 
I 
Introduced by Senator S. R. OsmeAa 111 
AN ACT 
TO REORGANIZE THE NATIONAL FOOD AUTHORITY, SEPARATING ITS 
REGULATORY FROM ITS PROPRIETARY FUNCTIONS, CREATING THE 
NATIONAL GRAIN COUNCIL, AND THE NATIONAL GRAIN AND SUGAR 
CORPORATION AND DEFINING THEIR POWERS AND FUNCTIONS, AND FOR 
OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Republic of the 
Philippines in Congress assembled: 
1 
SECTION I. Short. Tifle. - This Act shall be known as the “Food Security 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
Rationalization Act of 2004.” 
SEC. 2. Declaration of Policies - It is hereby declared the policy of the State 
to ensure food security for all Filipinos; to protect farmers and consumers from wide 
fluctuations in the prices of agricultural products; and to encourage effective and 
efficient government intervention in sectors which produce food. 
SEC. 3. Sfafemenf of Goals and Objecfives. - The goals and objectives of 
this Act are the following: 
a) To streamline the government’s involvement in the grain and sugar sector 
in order to ensure available, adequate and accessible supply of rice, corn 
grits and sugar during lean periods especially in times of calamities or 
emergencies at a reduced budgetary cost to government; 
b) To create an environment of transparency and competitiveness in the grain 
and sugar sector that is conducive to a market-based development; 
c) To create conditions that will allow the stabilization of food prices through a 
more liberalized trade policy; 
1 


3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
d) To strengthen direct subsidies to producers through infrastructure and 
production support; 
e) To encourage private sector participation in the development of post 
harvest and marketing facilities; and 
9 To provide more effective assistance to disadvantaged families through 
directly targeted food subsidies. 
SEC. 4. Definifion of Terms. - The following definitions apply to the terms 
used in this Act: 
a. 
“Emergency” refers to a situation that deviates from the normal due to 
fortuitous events which include acts of God such as, but not limited to, typhoons, 
floods, droughts, earthquakes, fires, volcanic eruptions, lahar flows, and acts of man 
such as political and/or civil disturbances, and widespread civil unrest; 
b. 
C. 
“Food security” refers to the policy objective, plan and strategy of 
substantially meeting the food requirements of the present and future generations of 
Filipinos, ensuring that food that is affordable is available to all, through a combination 
of local production and importation, and consistent with the overall national 
development objectives; 
“Grain” refers to palay, rice, white corn and corn grits; 
d. 
“National food security reserve” is the inventory of grain to be maintained 
as a matter of national policy to ensure food security; and 
e. 
“Price stabilization” refers to measures which ensure that the fluctuations 
of the prices of rice and corn grits are contained within a band, the limits of which will 
be specified by the Council. 
SEC. 5. Creation of the National Grain Council. - To implement the policies 
declared in this Act, there is hereby created a policy formulating body called the 
National Grain Council, hereinafter referred to as the Council. 
The Secretary of Agriculture shall serve as chairman of the Council, with an 
Undersecretary the Department of Trade and Industry as Vice-chairman and the 
following as members: 
2 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
a. 
b. 
C. 
d. 
e. 
f. 
G. 
A Deputy Director General of the National Economic Development 
Authority; 
An Undersecretary of the Department of Interior and Local Government; 
An Undersecretary of the Department of Budget and Management; 
An 
Undersecretary of the Department of Social Welfare and 
Development; 
A representative from a federation of rice and corn farmer organizations; 
A representative from a federation of consumer organizations; and 
A representative from a federation of grain business organizations. 
The three (3) private sector representatives to the Council shall serve for a term 
of three (3) years and shall be appointed by the President of the Republic of the 
Philippines from a list of nominees to be submitted by their respective duly 
accreditedkegistered 
organizations/federations. 
In the case of the farmer 
representatives, the provisions of Republic Act No. 7607 otherwise known at the 
Magna Carta of small farmers and its implementing rules and regulations shall have 
suppletory effect insofar as their nomination and selection to the council are 
concerned. 
The consumer group representative shall be nominated by the 
Presidential Commission for the Urban Poor (PCUP). 
Of those first appointed, the farmer representative shall serve for a term of 
three (3) years; the representative for consumer groups shall serve for a period of two 
(2) years, and the representative from grain business organizations shall serve for a 
period of one (1) year, without reappointment. 
I 
The Council shall meet regularly at least once every quarter on any date to be 
determined by the Chairman: Provided, That the Chairman may convene special 
meetings to discuss any urgent matters needing immediate resolutions. The Council 
members shall be entitled to a per diem of Five Thousand Pesos (P5,OOO) for each 
meeting actually attended by them. 
3 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
The Council shall adopt rules and regulations to govern its proceedings, call on 
any government agency or institution for assistance or support, and determine its 
official location and address. 
’ 
SEC. 6. Responsibilities, Powers and Functions of the Council. - The 
Council shall have the following responsibilities, powers and functions: 
A. To formulate and review on an annual basis, the buffer stock requirements 
at the national and local levels and to ensure that these requirements are 
achieved; 
B.To establish rules and regulations governing the importation of rice for the 
purpose of price stabilization and impose or collect fees and charges for 
said importation. 
C.To enter into contracts with the 
National Grain and Sugar Corporation 
created under this Act and/or any other private sector entity to undertake 
measure that would ensure the maintenance of proper levels of 
inventory 
including, but not limited to the direct importation of rice and/or the allocation 
of the import quotas among private sector entities including certified and 
licensed farmer cooperatives who are certified and licensed through the 
Council Secretariat, and to impose the necessary punitive measures and 
penalties against any breach in such contracts; 
D. To formulate and adopt a pricing mechanism for the stabilization of rice and 
corn grits prices; 
“E. To facilitate the exportation of appropriate volumes of rice if necessary, to 
prevent producer prices from falling below a target price; 
“F. 
To cause the procurement of palay at a predetermined support price 
through a purchase scheme requiring private sector participation; 
“G. To administer a rice contingency fund that will enable the government to 
respond to area-specific emergency situations. 
a 


I 
8 
9 
10 
I 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
“H. To determine and set the parameters for targeted food subsidy programs, 
including but not limited to allocation volumes, targeted beneficiaries, 
required budget, and implementing agency(ies); 
I. To undertake such other tasks and activities as may be necessary to 
ensure the attainment of national food security. 
SEC. 7. Secrefariat. -- The Council shall be assisted by a Secretariat, to be 
headed by an Executive Director. The organizational structure of the Secretariat shall 
be determined by the Council, based on the recommendation of the Executive 
Director. 
SEC. 8. Transfer offuncfions. -- The following functions of the National Food 
Authority shall be transferred to the respective agencies and instrumentalities of the 
govern men t : 
A) The establishment and enforcement of standards in grading, sampling and 
inspection, testing and analysis, specification, numenclature, units of 
measurement, code of measurement, code of practice and packaging, 
conservation and transport of grain and their substitutes and by-products, to 
the Bureau of Agriculture and Fisheries Product Standards (BAFPS) and 
the Bureau of Plant Industry (BPI) of the Department of Agriculture; 
6) The registration, licensing and supervision of MILLS AND warehouses, 
whether bonded or not, to the local government units in the respective 
localities; 
C) The development of more efficient ways, systems and facilities for 
harvesting, threshing, or shelling, drying, storage, milling, packaging, post- 
harvest handling, transporting, and/or shipping of grain and their substitutes 
and/or by-products, to the Philippine Rice Research Institute and the field 
operations services of the Department of Agriculture; and 
D) The monitoring of commercial rice stocks, prices, and stock movements, 
and inspection of rice stocks stored in private warehouses for purposes of 
29 
inventory taking, and the establishment and maintenance of marketing 
5 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
information dissemination systems in order to keep the public informed on 
the prevailing market situation of grains and their substitutes and/or their 
by-productdend-products in different parts of the country, to the Bureau of 
Agriculture Statistics of the Department of Agriculture; and 
E) The coordination of research and development activities on grain to the 
Bureau of Agricultural Research or the Department of Agriculture. 
SEC. 9. Creafion of fhe Nafional Grain and Sugar Corporafion. - To carry 
out the declared policy, there shall be created a body corporate known as the National 
Grain and Sugar Corporation, herein referred to as the Corporation. 
It shall be governed by a Board of Directors, hereinafter referred to as the 
Board, which shall be vested with the powers and functions of the Corporation, and 
which shall have overall responsibility for the formulation and coordination of 
strategies necessary to attain the avowed objective. The Board shall be composed of 
the DA Secretary as Chairman, the President of the Corporation as Vice-chairman; 
and three members from the private sector to be appointed by the President of the 
Republic of the Philippines from a list a nominees to be submitted by the Secretary of 
the Department of Agriculture. The appointed members shall be Filipino citizens, at 
least thirty five years of age, with sufficient experience in agribusiness management, 
of proven honesty, integrity, recognized competence and with familiarity with the 
Philippine market environment. The appointed members shall serve for a term of six 
(6) years: Provided, however, That of those first appointed, one (1) shall serve for a 
term of six (6) years, another for a term of four (4) years, and the last for a term of 
two (2) years, without reappointment. 
The Corporation Code shall govern all matters regarding the Corporation that 
are not specifically governed by this law. 
SEC. I O .  Powers and Funcfions offhe Corporafion. - In order to effectively 
carry out its responsibilities, the Corporation shall have the following powers and 
functions: 
6 


1 
a) 
In case a contract is executed between the Corporation and the Council, 
2 
the Corporation may maintain and manage a national food security reserve of 
3 
rice and corn grits equivalent to fifteen (15) days of national consumption at any 
4 
time each year. 
Subject to the terms of the contract, the Council may 
5 
determine the location and manner of distribution of such stock nationwide. 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
The reserve shall be augmented by July 1 of each year to a total reserve 
equivalent to thirty (30) days of national rice consumption; 
b) 
of grain; 
c) 
To own, lease, as well as acquire ownership by purchase or otherwise, 
or to invest in, hold, sell or otherwise dispose of stocks or bonds or any interest 
in either, or any obligation or evidence of indebtedness of any person, 
partnership, firm or corporation; 
d) 
To own, lease, operate or otherwise hold land, buildings, equipment and 
such other immovable properties as may be necessary to carry out its 
functions; 
e) 
prohibited by law as may be required in the performance of its functions; 
9 
To establish and restructure its own internal organization as the need 
arises and to fix the remuneration, emoluments, allowances and other fringe 
benefits of its officers and employees as the Board may deem fit, subject to the 
Sqlary Standardization Law, the Civil Service Code and the Government 
Service Insurance System. 
g. 
h. To exercise all the rights and powers of a domestic corporation duly 
organized and registered with the Securities and Exchange Commission not 
otherwise prohibited by law. 
SEC. 11. Administration and Capitalization. - The Corporation shall have 
To engage in the business of trading, marketing, importing and exporting 
To enter into, make, perform and carry out contracts otherwise not 
To sue and be sued; and 
29 
an authorized capital stock of Ten Billion Pesos (PI O,OOO,OOO,OOO.OO), 
divided into 
7 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
I 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
One Hundred Million shares (100,000,000) with par value of One Hundred Pesos 
(PI 00.00) each. Government Equity in the Corporation shall be wholly subscribed 
and paid by the national government. The properties of the present NFA, suitable to 
the operations of the Corporation, shall be exchanged for shares of stock of the 
Corporation. Said properties shall represent the equity investment of the government. 
The existing accumulated capital stocks and surpluses of the National Food Authority 
shall be evaluated and shall be additional paid-in capital of the Corporation. 
SEC. 12. Transitory provisions. - 
a) 
Within two (2) months after the approval of this Act, the President shall 
appoint the members of the Board; 
Within six (6) months after the approval of this Act, the Council shall 
likewise determine the organizational structure and staffing pattern of its 
Secretariat; 
b) 
c) 
The personnel of the National Food Authority shall, in a holdover 
capacity, continue to perform their respective duties and responsibilities 
and receive their corresponding salaries and benefits until such time 
when the organizational structures and staffing patterns of 
the 
Corporation and the Secretariat shall have been approved by the Board 
and the Council, respectively: 
Provided, That the preparation and 
approval of the said new organizational structures and staffing patterns 
shall, as far as practicable respect and ensure the security of tenure and 
seniority rights of affected government employees; 
Those personnel whose positions are not included in the new staffing 
pattern or who are not re-appointed or who choose to be separated as a 
result of the reorganization shall be paid their separation or retirement 
benefits under existing laws: 
Provided, That in no case shall the 
separation pay be less than one and one-fourth (1%) months’ salary for 
every year of service; 
d) 
8 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
“E. 
F. 
G. 
The Food Terminal Incorporated, a wholly owned subsidiary of the NFA 
shall be PLACED under the jurisdiction of the Department of Agriculture 
as an attached Corporation, with the Secretary as the Chairman of the 
Board of Directors. 
The present properties, assets, records and unexpended appropriations 
of the National Food Authority are transferred to the Corporation, 
including imported grain already in the country and such other stocks 
thereof that may arrive as a result of the current importation of the 
National Food Authority. Said stocks may be disposed of in accordance 
with the policy of the Corporation; and 
All obligations of the National Food Authority upon the approval of this Act 
shall be transferred to and absorbed by the national government. 
SEC. 
13. Appropriations for the Council and its Secretariat . - The 
amount necessary to finance the initial implementation of this Act insofar as the 
Council and its Secretariat are concerned, including the Rice Contingency Fund shall 
be charged against the existing appropriations of the National Food Authority. 
Thereafter, such sums as may be needed for their operation and maintenance shall be 
included as part of the appropriations of the Department of Agriculture in the annual 
General Appropriations Act, including the service fees to be paid to the Corporation for 
the implementation of the national food security reserve and the grain price 
stabilization program of government. 
SEC. [I61 14. Repealing Clause. - All laws, decrees, executive orders, rules 
and regulations, issuances or parts thereof inconsistent with the provisions of this Act 
are hereby repealed or modified accordingly. 
SEC. [I71 15. Separability Clause. - The provisions of this Act are hereby 
declared to be separable, and in the event one or more such provisions are held 
unconstitutional, the validity of the other provisions shall not be affected thereby 
9 


1 
SEC. [I81 16. EfTecfivify Clause. - This Act shall take effect fifteen (15) days 
2 
after its complete publication in at least two (2) national newspapers of general 
3 
circulation. 
Approved, 
10