DOF summons NFA...
the national government.
The DOF also noted that NFA revised its buying mix to heavily favor imports over rice from local farmers in July to December last year despite ample funds at its disposal and a standby credit facility that it could have readily tapped to maintain its mandated buffer stock.
In a letter dated September 5 to NFA Administrator Jason Aquino, Finance Assistant Secretary Soledad Emilia F. Cruz said based on a review of the agency’s financial records, it received a 15.10-billion subsidy from the government in 2017.
Of that, 13.01 billion was used to pay for accounts with the Bureau of Treasury, leaving a balance of 12.09 billion which could have been rolled over and used to procure more rice to beef up the NFA’s inventory. But instead, the DOF found out that NFA used the money to pay its short-term credit facility with the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP).
Low rice procurement A review of the NFA’s cash position, without taking into account the 12.09 billion subsidy, also confirmed that the NFA had a cash balance of 11.3 billion as of March 2017, which dropped to 11.2 billion as of end-June 2017; and available guaranteed facilities of 13.58 billion as of March 2017, which fell to 12.1 billion as of end-June 2017.
For its debt-servicing requirements in 2017, the NFA had a 15.4-billion advance from the national government that was favorably endorsed by the DOF to the Treasury.
This amount was for the NFA’s obligations that matured in October and November of that year, so that its available guaranteed credit facilities could be utilized to augment funds for rice procurement.
“Our analysis further shows that the NFA had ample resources coming from cash balances and available credit facilities, even without considering the subsidy receipts and uses, to procure the projected volume of local rice at least up to the third quarter under its May projection submitted to the DOF,” Cruz’s letter read.
Despite the availability of funds, in the second quarter of 2017, when the NFA reported that its buffer stock was approaching critical levels, the actual palay procurement was only 6,331 metric tons (MT) versus the estimate of 22,552 MT, which was submitted by NFA to the DOF in May 2017.
Cruz pointed out that the actual palay procurement for the second semester of 2017 was only 13,714 MT, which was much lower than the 151,129 MT projection that the NFA submitted to the DOF for the same period.
“In terms of mix of rice procurement, underlying assumptions in the revised May 2017 projection showed a mix of 68:32 in favor of imported rice. However, actual stock flow for 2017 resulted in a mix of 94:6, in favor of imported rice, which was a substantial drop in the share of actual local rice procurement compared with the May 2017 projections,” Cruz noted.
Cruz bared that on top of its funds and NG-guaranteed credit facilities that the NFA can use if funds are insufficient to procure rice, the DOF can also provide NG advances for debt servicing or NG guarantees on the required additional credit to support the agency’s operations.
Thus, the NFA was assured of enough funds to buy the projected volume of local rice at least up to the third quarter under its May projection.
The NFA is required to keep a buffer stock good for 15 days at any given time and a 30-day buffer stock during the traditional lean months of July to September.
Buy palay Meanwhile, House Deputy Speaker Arthur Yap proposed that the NFA buy unmilled rice from farmers at 117 per kilo, instead of the milled rice which would require additional labor cost.
"Our national harvest is coming this October 15. This is the main crop. One of the things we can consider right away is for NFA to go out and buy," Yap told reporters in a press briefing.
"They say 117 is too low. Then let's make it 117 for fresh and wet palay. The government can buy that because we have NFA warehouses with dryers," Yap, who served as Agriculture Secretary under the Arroyo administration pointed out.