By MAX ESTAYO

The government plans to increase tax subsidy on government rice imports and lend more to the National Food Authority to enable it to import more rice.

NFA recently contracted to buy rice at $708 per ton, 49 percent higher than what it paid two months ago. Local rice prices are likewise increasing.

World rice prices are going up as top exporters like Vietnam and China are limiting their sales to ensure that their home markets have enough of the staple.

Finance Secretary Margarito Teves said the tax subsidy on rice imports will help stabilize domestic rice prices.

NFA will be allowed to import rice without paying the import duty to the Bureau of Customs.

The BOC, will, in turn, draw from the government’s tax expenditure fund, where the subsidy will be treated as BOC income and eventually as government revenue although there’s no real cash turnover.

The NFA pays a 50-percent tariff on rice imports.

"We plan to increase the tax subsidy but as to exactly how much, we will still decide on this after meeting Agriculture Secretary Arthur Yap and other economic managers," Teves said.

Teves said the government is "studying" whether the tax subsidy could also be given to private importers.

Teves said the increase would follow those given NFA earlier, to enable it to allot more funds for rice importation.

Besides the tax subsidy, Teves said the government might also ask state-owned banks like the Land Bank of the Philippines to increase their credit lines to NFA.

"Prices of rice have been growing faster than the adjustment in the domestic price, so there’s a net requirement needed by the NFA," Teves said.

Teves nixed a direct cut on the tariff for its fiscal ramifications, saying the tax subsidy will do for the moment.

The NFA is one of the 14 monitored government-owned and -controlled corporations that receive regular subsidy from the national government.

The subsidy is used for the purchase of rice. By selling the basic staple at a lower price at the domestic market, it makes prices stable and ensures everyone has access to it.

NFA received P14 billion in subsidies last year.

It plans to import 2.1 million metric tons of the staples this year, up from about 1.8 million last year.

The central bank has urged the government to intervene to keep supply and prices stable to lessen impact on inflation.

Inflation rose to a 16-month high of 5.4 percent in February on increases in food and oil prices

Meanwhile, Vietnam’s Finance Ministry reported it will impose a duty on rice exports and exporters will limit shipments to 3.5 million tons in the first 10 months of this year following government instructions.

Prime Minister Nguyen Tan Dung asked the Finance Ministry to introduce the export tax and reaffirmed an order to suspend the signing of new rice contracts, the official of the Vietnam Food Association said, after a government meeting.

The 10-month limit of 3.5 million tons represents a drop of nearly 19 percent from 4.32 million tons shipped in the first 10 months of 2007.

The limits on sales by Vietnam, the world’s second largest exporter after Thailand, will further tighten supplies in Asia, but Hanoi has said it will be able to ship 1 million tons to the Philippines, or 67 percent of Manila’s request of 1.5 million tons.

"All the contracts which have been signed, including deals for the Philippines, will be implemented until the overall volume reaches 3.5 million tons," the food association official, who declined to be identified, told Reuters.

Last year the Philippines, one of the world’s biggest buyers of rice, bought 32.5 percent of Vietnam’s total rice exports of 4.5 million tons last year, the food association said.

Manila has so far awarded 876,701 tons of rice in two tenders for this year’s requirements of its national food staple, the bulk of which will be supplied by Vietnamese traders.(with reports from Reuters)