FIFTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENATE 
S.B. No. 234'( 
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
(L 
\ 
The National Food Authority (NFA) was created to address goals of ensuring 
low and stable food grain prices for consumers, pursuant to our national policy of 
agricultural modernization and sustainable poverty reduction. 
Historically, however, it has proven fiscally impossible to address all of these 
objectives. Support to rice farmers has often been compromised in favor of urban 
consumers, with the volume of releases in urban areas far outstripping procurement 
from farmers. A study conducted by the International Rice Research Institute has 
further revealed that under the NFA monopoly over rice importation, Filipino 
consumers have ended up paying more for rice than they would have had to under a 
free trade regime. There is a growing consensus among economists that with the NFA 
monopoly on rice importation, the costs imposed by NFA operations on the Philippine 
economy far outweigh the benefits to rice producers and consumers. 
Meanwhile, the present rice policy is potentially very lucrative for well-
connected rice traders and political insiders, creating opportunities for graft and 
corruption, hidden in the followingl: 
1. Unnecessarily high commissions paid to import-brokers. 
2. Bribes paid by rice traders and/or wasteful lobbying/favor-currying to obtain 
import rights. 
3. Government-to-government contracts whereby the Philippine government 
commits to buy low-quality rice at high market prices, with some parties 
pocketing the difference. 
4. High-profits extracted by importers and wholesalers (above their legal and 
illicit payments for import rights and lobbying expenses). 
5. High-profits extracted by cartelized retailers. 
6. Other unnecessary costs due to inefficiencies in marketing and distribution. 
Many of the anomalies associated with the NF A' s operations may be traced to its 
charter which mandates it to exercise both proprietary and regulatory roles. In other 
words, the NF A participates in a market that it also regulates. 
1 James A. Roumasset, "The Microeconomics of Agricultural Development in the Philippines," Working Paper No. 
02-10, ADB, April 2002 


This bill addresses the issue of conflict of interest with the reorganization of the 
NFA into the National Strategic Food Reserve Corporation, which will provide the 
government with a service arm for the maintenance of strategic reserves in basic food 
commodities. Regulatory functions of the NFA shall be reverted to the Department of 
Agriculture, while management of food subsidies for the poor shall be transferred to the 
Department of Social Welfare and Development, which is better equipped to implement 
a focused program. These changes shall minimize the redundancies prevalent in the 
previous NF A administration, heighten the focus of government efforts on essential 
public services, and reduce opportunities for graft and corruption. 
In view of the foregoing, the passage of this bill is earnestly sought. 
·~::;:~;::~:::;L~:;O~:IUi:::N::c.EiiGiRDA 
Senator 


FIFTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENATE 
S.B. No. 
2347 
Introduced by Senator Loren Legarda 
AN ACT 
I~ 
REORGANIZING 
THE 
NATIONAL 
FOOD 
AUTHORITY 
INTO 
THE 
NATIONAL 
STRATEGIC 
FOOD 
RESERVE 
CORPORATION 
AND 
REDEFINING ITS POWERS, APPROPRIATING FUNDS THEREFOR AND FOR 
OTHER PURPOSES 
Be it enacted by the Senate and House of the Representatives of the Philippines in 
Congress assembled: 
1 
SECTION 1. Title. - This Act shall be known as the "National Food 
2 
Authority Reorganization Act of 2010." 
3 
4 
SEC. 2. Declaration of Policy and Objectives. - It is hereby declared the 
5 
policy of the State to ensure food security for all Filipinos, attain sustainable 
6 
development, reduce poverty and promote social justice, empower the rural sector, 
7 
and improve the productivity and income of agricultural workers and producers. 
8 
Towards this end, the government shall orient its programs for the immediate 
9 
attainment of the following objectives: 
10 
a) 
To establish linkages among the rice farmers, agricultural producers, 
11 
agricultural support service providers and the market; 
12 
b) To rationalize government intervention in the rice sector by focusing its 
13 
thrust on cost-effective, transparent and predictable programs aimed at 
14 
improving market efficiency; 
1 


1 
c) 
To promote private sector participation in ensuring the country's food 
2 
security and price stabilization of staple crops especially rice; and 
3 
d) To 
focus 
government price 
subsidies 
to 
the 
most 
economically 
4 
5 
disadvantaged. 
6 
SEC. 3. Definition o/Terms. - For purposes of this Act: 
7 
a) "Calamity" shall refer to a fortuitous event which brings great loss 01' 
8 
destruction, including acts of God such as a typhoon, flood, drought, 
9 
earthquake or volcanic eruption, and acts of man such as political and/ or 
10 
civil disturbances or widespread civil unrest; 
11 
b) "Capitalization" shall refer to resources invested in the different lines of 
12 
activity in the foodgrains industry, including the cost of stocks, whether 
13 
on consignment or cash basis, cost of facilities and equipment, and loans 
14 
used directly and exclusively for the business; 
15 
c) "Diversion" shall mean any of the following circumstances: 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
i) 
ti) 
iii) 
iv) 
Unreasonable depletion of stocks; 
Selling or lending of government stocks to another grains 
businessmen; 
Selling or offering to sell government stocks beyond the 
maximum quantity or· price allowed by- law, rules and 
regulations; or 
Storing or selling government stocks in places other than those 
duly authorized by law; 
d) "Farmgate Price" shall refer to the prevailing buying price of a certain 
commodity at the farm level in a certain locality at a given time; 
e) "Farmers" shall refer to agricultural producers of foodgrains, whether 
tillers or administrators of land; 
2 


1 
f) "Foodgrains" shall refer to palay, rice, white corn or corngrits; 
2 
g) "Food Security" shall refer to the policy objective of substantially meeting 
3 
the food requirements of present and future generations of Filipinos, 
4 
ensuring that food is affordable and available to all, through a 
5 
combination of domestic production and importation, and consistent with 
6 
the overall national development objectives; 
7 
h) "Hoarding" shall mean the undue accumulation by any person or group 
8 
of persons of foodgrains beyond normal inventory levels, or the 
9 
unreasonable limitation or refusal to dispose of, sell or distribute stocks of 
10 
any prime commodity to the general public or the unjustified taking out of 
11 
any prime commodity from the channels of production, trade commerce 
12 
and industry; 
13 
i) "Licensing" shall refer to the act of granting an authority or privilege to a 
14 
qualified applicant to engage in a particular line of activity in the 
15 
foodgrains industry; 
16 
j) "Price Manipulation" shall refer to the act of causing prices of essential 
17 
commodities to fall or rise for one's own profit by falsifying figures, 
18 
accounts and other related information thereon; 
19 
k) "Price Stabilization" shall refer to measures which ensure that realized 
20 
fluctuations of the price of food grains conform to people's expectations; 
21 
1) "Government Rice Buffer Stock" shall refer to the inventory of rice equivalent 
22 
to at least thirty (30) days national rice consumption by July 1 of every year, 
23 
for stabilization purposes particularly in deficit areas and during lean 
24 
production periods. This shall be inclusive of the IS-day Strategic Rice 
25 
Reserve; 
3 


• 
1 
m) "Service Corporation" shall refer to the concept of a government-owned 
2 
corporation performing the food security function of the State with 
3 
minimum government subsidYi and 
4 
n) "Strategic Rice Reserve" shall refer to the minimum inventory of rice 
5 
equivalent to at least fifteen (15) days national rice consumption, to be 
6 
maintained year-round under government control to ensure food security 
7 
during times of calamities. 
8 
9 
SEC. 4. Reorganization of the National Food Authorit1j. - To execute the 
10 
foregoing policy, goals and objectives, there is hereby created a body corporate 
11 
known as the National Strategic Food Reserve Corporation (NSFRC) which shall be 
12 
attached to the Department of Agriculture (DA). 
13 
14 
SEC. 5. Board of Directors. - The powers and functions of the NSFRC shall be 
15 
vested in a Board of Directors which shall have the responsibility of formulating a 
16 
comprehensive program for the development of the food grains industry. The Board 
17 
shall be composed of a Chairman, President, and three (3) Members who shall be 
18 
Filipino citizens, at least thirty-five (35) years of age, with sufficient experience in 
19 
agri-business and management, and of proven honesty, integrity and competence. 
20 
Both the Chairman and the President shall be appointed by the President of the 
21 
Philippines from nominees to be recommended by the Secretary of the DA within 
22 
thirty (30) days from the creation of the NSFRC. 
23 
Within the same period, the Secretaries of the DA, Department of Social 
24 
Welfare and Development (DSWD), and Department of Trade and Industry (DTI) 
25 
shall recommend fifteen (15) nominees from which the President of the Philippines 
26 
shall choose the remaining three (3) members of the Board., The first member shall 
27 
seINe for a term of three (3) years, the second member for two (2) years, and the 
4 


1 
third member for one (1) year. Subsequent vacancies in the Board shall be filled up 
2 
from a list to be submitted by the Secretaries consisting of three (3) nominees for 
3 
each vacancy, from which the President of the Philippines shall choose a 
4 
replacement to serve for a term of three (3) years. 
5 
Within thirty (30) days from the submission of the list of nominees, the 
6 
President of the Philippines shall constitute the Board. 
7 
The Board shall meet at least once a month on any date to be determined by 
8 
the Chairman; Provided, that the Chairman may convene special meetings to discuss 
9 
any matter needing immediate resolution. The Board shall be entitled to a per diem 
10 
for each meeting actually attended by them and other remuneration as may be 
11 
determined by the Board in accordance with existing policies of the government. 
12 
13 
SEC. 6. Organization. - Within ninety (90) days from the constitution of the 
14 
Board, it shall approve the NSFRC's organizational structure, and salary and staffing 
15 
pattern. For this purpose, the salary standardization law shall be applicable, except 
16 
with respect to the authority of the Board to give performance incentives to 
17 
employees of the NSFRC; Provided, that performance incentives may only be 
18 
allowed if the NSFRC registers a profit and their yearly cost does not exceed the 
19 
eqUivalent of 10% of the NSFRC's net income before taxes nor 100% of the gross pay 
20 
of its employees. 
21 
The President shall have the authority to appoint, promote, transfer, assign, 
22 
reassign, remove, suspend or otherwise discipline officers and employees of the 
23 
NSFRC as may be delegated to him by the Board. 
24 
25 
SEC. 7. Management. - The President shall direct and manage the affairs of 
26 
the NSFRC subject to the policy formulations of the Board. The President shall 
27 
receive the same salary and emoluments of a Department Secretary. 
5 


1 
There shall be two (2) Executive Vice Presidents appointed by the Board for a 
2 
term of three (3) years who shall assist the President in the performance of his 
3 
functions. Either of the Executive Vice Presidents shall exercise the powers and 
4 
functions of the President in his absence. The Executive Vice Presidents shall receive 
5 
the same salary and emoluments of a Department Undersecretary. 
6 
The Executive Vice Presidents and Vice President shall be citizens of the 
7 
Philippines, at least thirty-Hve (35) years of age, of proven honesty and integrity and 
8 
of recognized managerial competence. 
9 
10 
SEC. 8. Powers and Functions. - The NSFRC shall exercise the following 
, 
11 
powers and functions: 
12 
a) 
To undertake the duty and tariff-free importation of rice for the 
13 
government in order to maintain the appropriate volume of the 
14 
Strategic Rice Reserve and Government Rice Buffer Stock by July 1 
15 
of each year; 
16 
b) 
To own, lease, acquire by purchase or otherwise, hold, sell or dispose 
17 
of stocks or bonds or any interest in either or any obligation or 
18 
evidence of indebtedness of any person, partnership, Hrm or 
19 
corporation; 
20 
c) 
To issue debt instruments that are agri-agra eligible and guaranteed by 
21 
the national government up to a maximum amount of Five Billion 
22 
Pesos (P5,000,000,000), beyond which the approval of the President 
23 
of the Philippines shall be required; 
24 
d) 
To own, lease, operate or otherwise hold land, buildings, equipment, 
25 
facilities and such other properties as may be necessary to carry out 
26 
its functions; 
6 


1 
2 
3 
4 
5 
e) 
f) 
g) 
To establish its internal organization and fix the remuneration, 
emoluments, allowances and other benefits of its officers and 
employees; 
To exercise the rights and powers of a domestic corporation; and 
Subject to the gUidelines to be· formulated by the Board, to negotiate 
6 
with private or government entities in the business of trading, 
7 
marketing, importing and exporting of commodities. 
8 
9 
SEC. 9. Capitalization. - The NSFRC shall have a total authorized 
10 
capitalization of Fifteen Billion Pesos (p15,OOO,OOO,OOO) consisting of One Hundred 
11 
Fifty Million (150,000,000) shares with par value of One Hundred Pesos (PI00) per 
12 
share. From this amount Twelve Billion Pesos (P12,OOO,OOO,OOO) shall be in the form 
13 
of assets from the NFA and Three Billion Pesos (P3,OOO,OOO,OOO) shall be in the form 
14 
of cash to be appropriated by the national government over a period not exceeding 
15 
ten (10) years. The Department of Budget and Management (DBM) shall include 
16 
annually during the three (3) year transition period the amount of Five Hundred 
17 
Million (P500,OOO,OOO) in the President's Budget submitted to Congress. 
18 
19 
SEC. 10. Assets and Liabilities. - All assets and liabilities of the NFA not 
20 
transferred to the NSFRC shall be retained and administered, disposed of and 
21 
liquidated by the NF A itself, which shall continue to exist as the NF A Board of 
22 
Liquidators (BOL). The NFA-BOL shall receive budgetary support from the national 
23 
government and be manned by personnel detailed from the NFSRC. It shall be 
24 
deemed abolished upon full disposition of assets and liquidation of liabilities of the 
25 
NF A within a period not to exceed ten (10) years, after which all remaining assets 
26 
and liabilities shall be deemed transferred to the national government. 
7 


1 
Assets pertaining to the regulatory, developmental and research functions of 
2 
the NFA shall be transferred to the DA. 
3 
4 
SEC. 11. Penal Provisions. - The following acts or omissions shall be 
5 
punishable as follows: 
6 
7 
a) Serious Offenses: 
8 
i) Cornering or hoarding of foodgrains resulting in an artificial shortage 
9 
or scarcity of supply and increase of prices thereof in any part of 
10 
the country; 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
ii) 
Unreasonable depletion of stocks; selling or lending of government 
stocks to another foodgrains seller; selling or offering to sell 
government stocks beyond the maximum quantity or price allowed 
by the DA; or storing or selling government stocks in other places 
other than those duly authorized by law; 
iii) 
Causing prices of essential commodities to fall or rise for one's 
own profit by changing or falsifying figures, accounts and other 
related information pertaining thereto; 
v) 
Printing, issuing, or knowingly using, processing or negotiating, a 
cancelled, unauthorized, illegal, counterfeit or falsified warehouse 
receipt; 
vi) 
Failure or unlawful refusal of an accountable official to turn over or 
remit collection within a reasonable period of time; or 
vii) Failure or unlawful refusal of a foodgrains warehouseman to 
deliver food grains deposited with him; Provided, that the 
warehouseman shall be entitled to the allowance authorized for 
depreciation of the food grains deposited. 
8 


1 
The offender shall, upon conviction, be punished by imprisonment of not less 
2 
than six (6) years and one (1) day to not more that twelve (12) years, or a fine of not 
3 
less than Two Hundred Thousand Pesos (P200,000) to not more than Two Million 
4 
Pesos (P2,000,000), or both, at the discretion of the court. 
5 
6 
7 
8 
9 
10 
11 
b) Less Serious Offenses: 
i) 
Conniving in the concealment of stock shortage in a food grains 
warehouse; 
ii) 
Knowingly submitting any report containing false information or 
data; or 
iii) 
Failure or refusal of a warehouseman to allow the inspection of his 
12 
food grain stocks to misrepresent their quantity or quality or to 
13 
conceal a shortage, including the impeding of such inspection and 
14 
examination by abandonment, absence or other similar means. 
15 
The offender shall, upon conviction, be punished by imprisonment of not less 
16 
than fou~ (4) years and one (1) day to not more than eight (8) years, or by a fine of 
17 
not less than One Hundred Thousand Pesos (PI00,000) to not more than One Million 
18 
Pesos (Pl,OOO,OOO), or both, at the discretion of the court. 
19 
20 
c) Light Offenses: 
21 
i) 
Willful non-compliance with any official order, circular or directive 
22 
lawfully issued by the DA, unless such constitutes a higher offense 
23 
under this Act, in which case the offender shall be penalized under 
24 
the latter offense; 
25 
26 
ii) 
Selling or offering to sell to the NSFRC foodgrains other than those 
directly produced by them as farmer or shared by them as tenant or 
9 


1 
landlord, or knowingly buying such foodgrains ostensibly for the 
2 
NSFRC or conspiring in such fraud; or 
3 
iii) Committing any other violation of a provision of this Act for which 
4 
no specific penalty is prescribed and which is not punished under 
5 
any other existing law. 
6 
The offender shall, upon conviction, be punished by imprisonment of not less 
7 
than two (2) years to not more than four (4) months, or a fine of not less than Fifty 
8 
Thousand Pesos (P50,000) to not more than Five Hundred Thousand Pesos 
9 
(P500,000), or both, at the discretion of the court. 
10 
11 
SEC. 12. Appropriation and Transfer of Mandates. - The following powers 
12 
and functions of the NF A shall be transferred to the following agencies: 
13 
a) Programs directly relating to food subsidies for the poor, particularly 
14 
the Targeted Rice Distribution Program (TRDP) and Coconut Farmers 
15 
Food Access Program (CFFAP), shall be transferred to the DSWD; 
16 
b) Programs for the stabilization of prices and foodgrains supply at the 
17 
farm gate shall be transferred to the DA; 
18 
c) Programs for the stabilization of rice supply and prices at the 
19 
consumer level shall be transferred to the DA; 
20 
d) Regulation of foodgrains trading and marketing, including the 
21 
registration and licensing of warehouses, determination of quality 
22 
standards, and determination of the requirements of a national 
23 
strategic rice reserve shall be transferred to the DA. 
24 
These government agencies shall be responsible for sourcing funds for these 
25 
programs, for which they shall exclusively commission the NSFRC as a Service 
26 
Corporation. To allow for the continued implementation of the above mandate, the 
27 
DBM shall during the transition period include in the President's budget proposal, 
10 . 


1 
the minimum amounts of One Billion Pesos (P1,OOO,OOO,OOO) for use by the DA in 
2 
farmgate price and supply stabilization, Two Hundred Fifty Million Pesos 
3 
(P250,OOO,OOO) for use by the DA in consumer price and supply stabilization, and 
4 
Five Hundred Million Pesos (P500,OOO,OOO) for the DSWD. 
5 
6 
SEC. 13. Service Incentive Package. - Permanent officials and employees 
7 
of the NF A who .choose to leave government service, or who shall choose to retire if 
8 
eligible, shall be given a Separation Incentive Package (SIP) in addition to other 
9 
retirement benefits to which they may be entitled under existing laws and 
10 
regulations, based on the following scale: 
11 
a) 1.5 x gross monthly pay for every year of service up to 20 years; and 
12 
b) 2.0 x gross monthly pay for every year of service in excess of 20 years. 
13 
,Employees who opt to retire under the provisions of Republic Act No. 
14 
1616 shall receive the equivalent of 1.5 gross monthly pay for every year of service. 
15 
Employees not retiring who are not absorbed in the NSFRC shall be placed in the 
16 
DA, without loss of seniority and benefits. The existing number of NF A personnel 
17 
shall not be increased and no new hiring shall be allowed until all NF A employees 
18 
shall have been placed. 
19 
For the purpose of implementing this provision, there is hereby 
20 
appropriated the necessary amount out of any funds or resources of the NF A. Any 
21 
deficiency shall be automatically appropriated in the General Appropriations Act of 
22 
the succeeding year. 
23 
To provide continuity in operations, all incumbent personnel of the NF A 
24 
shall continue to exercise their respective duties and functions and receive the 
25 
corresponding salaries and benefits until the organizational structures and staffing 
26 
patterns of the NSFRC shall have been approved. 
27 
11 


1 
SEC. 14. Transitorlj Provisions. - Officials and employees of NFA may be 
2 
directed to remain in the service for a period not exceeding three (3) years, without 
3 
losing their right to avail of the SIP within this period. The Board shall each appoint 
4 
three (3) representatives to constitute a mediation group that shall settle issues on 
5 
the distribution of assets and personnel, to be headed by a Chairman appointed by 
6 
the President of the Philippines. 
7 
8 
SEC. 15. Suppletory Application of the Corporation Code. - In the absence 
9 
of any applicable provision under this Act, the pertinent provisions of Batas 
10 
Pambansa Big. 68, otherwise known as the Corporation Code of the Philippines, 
11 
may be applied suppletorily. 
12 
13 
SEC. 16. Repealing Clause. - All laws, decrees, executive orders, rules and 
14 
regulations, issuances or parts thereof inconsistent with the provisions of this Act 
15 
are hereby repealed or modified accordingly. 
16 
17 
SEC. 17. Separabilihj Clause. - The provisions of this Act are hereby 
18 
declared to be separable, and in the event one or more such provisions are held 
19 
unconstitutional, the validity of the other provisions shall not be affected thereby. 
20 
21 
'SEC. 18. EffectiVity. - This Act shall take effect fifteen (15) days after its 
22 
publication in English or Filipino in the official gazette or in at least two (2) 
23 
newspapers of general circulation, whichever comes first. 
24 
25 
Approved, 
12