Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

REGEIVED

ATE:

TE:

SEVENTEENTH CONGRESS 5
Second Regular Session

HOUSE BILL No._7516

INTRODUCED BY HONORABLE GAVINI “APOL” C. PANCHO

EXPLANATORY NOTE

Rice is the staple food of about 80 percent of Filipinos, and therefore a major
item in the consumption basket of consumers. It is the single most important
agricultural crop in the Philippines, and therefore a major source of income of
millions of Filipino farmers. Because of its political significance, the government is
heavily involved both in the supply and distribution of rice to assure consumers
sufficient and stable supply of rice at low prices and to maintain a reasonable return
to rice farmers with adequate price incentives."

Similarly, rice farmers are the most numerous farmers in the country, and a
large proportion of them live below the poverty line. Despite improvements in the
country’s economy, official poverty statistics show that the concentration of the poor
remains in the agriculture sector. Data available from the Philippine Statistics
Authority (PSA) show that farmers in particular consistently posted one of the highest
poverty incidences among the nine basic sectors in the Philippines at 38.3%.

Within this context significant price falls of palay, especially during the peak
harvest season, have significant adverse impact on the incomes and poverty status
of the rice farmers, especially because most of them do not have the capability to
hold off the sale of their harvest due to credit and storage constraints. Exacerbating
the situation is the fact that the welfare of our farmers continue to be at risk due to
the government's continued reliance on imports and lower spending on local rice
production, the existence of corruption in the agencies tasked to support and protect
the farmer's interests and the exploitation by traders and middlemen in rice and
palay trading.

Many interventions have been implemented by past administrations but the
government continues to struggle to uplift the farmers out of poverty, improve their
access to basic services, and help protect farmers against poor competitiveness of

2 See “Rice Prices and the National Food Authority” by Ponciano S. Intal, Jr., Leah Francine Cu and Jo Anne
IMlescas.


palay prices and unfair rice/ palay trading practices. Palaylrice trading involves
procurement, transportation, storage, milling and distribution.

For one, the reduced competitiveness of local palay due to importation
resulted to lower purchase price of palay traders passed on the supposed reduction
of their expected profit to farmers. The importation stabilized the price and supply of
rice, but it destabilized the development of the private sector in grain trading.

Currently, government interventions are implemented through the National
Food Authority (NFA), which is an attached agency of the Department of Agriculture.
The NFA took over the operation of the National Grains Authority (NGA), which was
in operation from 1972 to 1981. The administration of NGA in turn succeeded the
Rice and Corn Administration, which operated from 1962 to 1972. Historically, this
cycle of renaming and establishing of new offices has been the observed approach
towards finding a solution to the aforementioned challenges. Immediately after the
Second World War, the Philippines went through a period of rice shortage and the
government established the National Rice (NARIC) to handle address the problem at
the time. Consequently the Rice and Corn Agency Board was created owing to the
inability of the NARIC to solve the problem, but like the NARIC the Board proved
similarly inadequate to resolve the situation.

Moreover on June 4, 1992 Republic Act 7607 also known as the “Magna
Carta of Small Farmers” was signed into law. It primarily aims in realizing equitable
distribution of benefits and opportunities through the empowerment of the small
farmers. The law recognizes the country’s responsibility for the welfare and
development of small farmers by giving them support in attaining their
‘socioeconomic goals.

Even with this however, the procurement system for palay has remained the
same. There is a bidding market where farmers, traders and NFA representatives
interact to decide how and where the available palay will be sold and stored and at
what price. During the bidding phase, traders naturally try to procure the palay and
rice from the farmers at the lowest prices. Moreover since the farmers have no direct
access to warehouses to stock their palay, they are forced to sell their stock at the
soonest possible time to avoid the risk of decreasing weight of their produce as palay
continue to dry up the longer they are kept in stock.

The trader's prices however still offer better prices than that of the NFA. As a
result most of the available rice go to the traders and only a small portion is acquired
by the NFA. Consequently, this results in a lower stock in our national inventory
leading the government to spend more dollars to import more rice annually in order
to sustain national demand for rice. Suffice to say, the situation has remained
unresolved and continues to be a standing issue working against public interest and
place at risk the food security of our people.


In order to protect the interests of our farmers, the NFA and the farmers must
form a relationship which will push a palay procurement system that can correct the
flow of palay in the market and responsively address such realities on the ground like
the opportunism and experiences of price manipulation during the harvest season.

As of late, rice farmers have clamored for government to adopt a procurement
system that gives them “freedom of choice” in the use of hybrid seeds suitable to
their local climates instead of being limited to the lowest-cost seeds. In the same
light many farmer organizations have been urging government to prioritize quality
over economy --- choosing a hybrid seed based on quality, rather than just low price,
is also in compliance with earlier pronouncements of President Rodrigo R. Duterte
that government will improve procurement system by choosing quality, not only low
price in government purchases.”

This bill proposes a palay procurement system using a Treasury Crop
Certificate (TCC) which is backed up by the stock of palay stored in the facilities of
the NFA. The concept consists of a system where 50% of the harvest of the farmers
will be sold to the market while the other 50% will be sold to the NFA. The NFA will
then issue a TCT for 50% of the total amount of the palay it buys for the farmers
while the other 50% will be paid in cash.

The TCT will function as a negotiable instrument guaranteed by the Bangko
Sentral ng Pilipinas (BSP), the value of which will be determined by the prevailing
price of palay in the market at the time of issuance. It also identifies the farmer as the
land cultivator rather than the trader who is entitled to repurchase the instrument at
50% of the share.

The whole value of the stock owned by the NFA will be stored in its
warehouses but the farmer has the option of repurchasing said palay stocks after a
period of three months subject to fees arising from storage, insurance and bank
interests. The farmer can also use the TCT he has been issued as collateral to be
able to facilitate loans from private banks. This significantly improves the value chain
afforded to the farmers and allows them the power to decide and make choices
consonant to their need.

The proposed palay procurement system solves three major issues that have
been discussed: 1) First it significantly helps prevent palay shortage and reinforce
the stock of palay in our NFA warehouses to support public demand while
diminishing our reliance on importation to maintain buffer stocks. This not only gives
the government opportunity to save on dollars and avoid a depletion of our dollar
reserves, but similarly allows the NFA to free more of its annual budget and allocate
the same for its programs and projects; 2) Second, it will help regulate palay prices
and insulate farmers from opportunism and price manipulation during harvest

2 See http://www.manilatimes.net/rice-farmers-seek-choice-govt-seed-program/303294/


season; 3) Lastly but equally important, this proposed palay procurement system can
urgently help ensure that our farmers get maximum financial gains for their produce,
empower them to make the choices they need, and become more productive
members of the sector.

With this purpose in mind, the immediate approval of this bill is ingly

requested.

GAVIN| “APOL” C. PANCHO
Represbhtative
2" Distfct 6f Bulacan


Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City

SEVENTEENTH CONGRESS
‘Second Regular Session

7516

HOUSE BILL NO.

INTRODUCED BY HONORABLE GAVINI “APOL” C. PANCHO

“AN ACT PROVIDING FOR THE PALAY PROCUREMENT SYSTEM USING A
TREASURY CROP CERTIFICATE FOR RICE FARMERS AND APPROPRIATING
FUNDS THEREFOR”

Be it enacted by the Senate and the House of Representatives in Congress of the
Philippines assembled:

SECTION 1. Short Title. — This Act shall be known as “Palay Procurement
System Act of 2018".

SECTION 2. Statement of Policy. /t is the policy of the State to pursue the
realization of equitable distribution of benefits and opportunities through the
empowerment of the small farmers. It recognizes its responsibility for the welfare
and development of small farmers by giving them support in attaining their
socioeconomic goals.

Article Il, Section 9 of the 1987 Constitution provides that the State shall
promote a just and dynamic social order that will ensure the prosperity and
independence of the nation and free the people from poverty through policies that
provide adequate social services, promote full employment, a rising standard of
living, and an improved quality of life for all; Moreover Section II of Republic Act No.
8435, otherwise known as the Agriculture and Fisheries Modernization Act of 1997,
declares that the State shall enable those who belong to the agriculture and fisheries
sectors to participate and share in the fruits of development and growth, and that the
State shall ensure the availability, adequacy, accessibility and affordability of food
supplies to all at all times;

Toward these ends, the State shall maintain a farm to fork food safety
regulatory system that ensures a high level of food safety, promotes fair trade and
advances the global competitiveness of Philippine foods and food products.

SECTION 3. Responsibility for Administration and Enforcement. It shall
be the primary duty of the National Food Authority together with concerned
government offices to effectively enforce the provisions of this Act. All duly
constituted law enforcement agencies and officers of national, provincial, city or
municipal government, baranggay or of any political subdivision thereof, shall, upon


the call or request of the NFA, DA or BSP, render unqualified/ unconditional
assistance in enforcing the provisions of this Act and to prosecute any person
violating the provisions of the same.

SECTION 4. Implementing Guidelines. Within sixty (60) days from the
effectivity of this Act, the National Food Authority (NFA) in close coordination with
Bangko Sentral ng Pilipinas (BSP), the Department of Agriculture(DA), and the top
three (3) rice farmers organizations to be identified by the DA, shall formulate and
issue the necessary rules and regulations to implement this Act.

SECTION 5. Information Program. The NFA in coordination with the DA and
BSP shall develop and implement a continuous information dissemination program
on the provisions of this Act, both at the national and local level, immediately after
the enactment of this law.

SECTION 6. Transition Phase. A transition phase will be provided in the
implementing rules and regulations following the approval of this Act in order for the
NFA and BSP to make the appropriate preparations for the effective implementation
of this Act. Likewise the provisions of this Act shall be included in the Citizens
Charter of all NFA offices.

SECTION 7. Appropriation. To carry out effectively the provisions of this Act,
the initial funding required for the implementation of this Act shall be sourced from
the savings of the Executive Branch of the government and other possible sources
that may be determined by the Office of the President, and subsequent funds
needed shall be sourced from the General Appropriations Act for the year following
the implementation of this Act.

SECTION 8. Separability Clause. /f for any reason, any provision of part
hereof is declared invalid, the other provisions not affected thereby shall remain in
full force and effect.

SECTION 9. Repealing Clause. Any provision of the law, presidential decree,
executive orders, rules and regulations contrary to the provision of this Act is hereby
repealed, amended or modified accordingly.

SECTION 10. Effectivity. This Act shall take effect fifteen (15) days after its
complete publication in the Official Gazette or in at least two (2) newspapers of
general circulation, whichever comes earlier.

Approved,