THE government plans to import up to 2.2 million tons of rice for this year in what could be the biggest overseas purchase of the national staple in a decade.

Agriculture Secretary Arthur Yap yesterday said the government was looking to buy 1.8 million tons to 2.2 million tons of rice for this year, up from an earlier 1.6-1.8 million tons as it tries to secure supplies amid soaring prices.

Prices of commercial rice range from P26 to P33 a kilo. Rice from the National Food Authority sells for P18.25 a kilo.

"This will all be very sufficient for the NFA to ensure that there will be food security in the coming months, especially the lean months," Yap said, after signing a supply agreement with Vietnam on the sidelines of the Philippine Development Forum.

"I'm not worried about 2008; we're going to have the supply. I'm worried about 2009," he added.

The supply agreement signed by Yap and Vietnamese Industry Minister Yu Huy Hoang specified up to 1.5 million tons, but Hanoi has previously said it could only guarantee Manila 1 million tons of rice this year.

The government has already imported about 700,000-800,000 tons of Vietnamese rice this year.

The agreement's framework is valid for three years and would be automatically renewed for another three years unless either country objected.

Yap said under the agreement, the Vietnamese government agrees to sell, "unless under circumstances of natural disaster and harvest loss, and the Philippines agrees to buy, up to 1.5 million metric tons of Vietnamese white rice annually starting year 2008, subject to market and production conditions and to terms allowable under applicable laws of both countries."

"We'll try to sell to the Philippines as much as we can," said Ambassador Xu Xuan Pruong.

Yap said the Vietnamese commitment will be complemented by the move of the United States' Department of Agriculture to increase the Philippines' credit commodity program from $65 million to $75 million this year, which he said will pave the way for an additional 100,000 tons of US rice.

The Philippines was one of the world's top importers of rice last year, with purchases of nearly 1.9 million tons, almost three-quarters of which came from Vietnam. It imported 2.4 million tons of rice in 1998 during the Asian financial crisis.

So far, the government has bought about 1.2 million tons of rice for this year and aims to increase domestic production of unmilled rice to a record 17.32 million tons, up 7 percent from last year.

MORE RICE LANDS

Yap said for next year he was going to increase the amount of land devoted to rice production. But even with rising local harvests, the output is not enough to keep up with a rapidly expanding population of three babies born every minute.

The soaring cost of rice has also helped push annual inflation to a 16-month high of 5.4 percent and put a real strain on the poor, who make up the bulk of the Philippines' 90 million people and rely on the grain to survive.

President Arroyo has taken a personal interest in the country's rice supplies for fear a shortage in-between harvests in the third quarter could spell political trouble for her

P50 A KILO

Several Luzon-based rice farmers groups warned that rice could reach P40 to P50 a kilo in July because of trading manipulations.

The groups said the expected palay harvest next month, pegged at 1.9 million metric tons, will last for only two months.

Jimmy Tadeo, chairman of the National Rice Farmers Council, said traders would "definitely take advantage of the limited supply while the government will be dependent on the imported rice for its buffer stock."

Jessica Reyes-Cantos, lead convenor of the Rice Watch and Action Network (R1), said reports of tightening global supply of rice have pushed local prices "abnormally high even as the harvest season is still headed for its peak this April."

The groups noted that traders buy palay at P12 to 16 per kilo while the NFA is still buying the grain at P10 per kilo.

"With this lopsided participation of NFA, we will not be surprised if the traders who bring the rice to the market are able to command the prices of this basic commodity and will be able to set the prices when the supply further tightens in July to September," said Trinidad Domingo, chairwoman of the Pambansang Koalisyon ng Kababaihan sa Kanayunan and a rice farmer from Nueva Ecija.

UNBEARABLE PRICES

Tadeo said government was not even able to help the farmers cope with the rising cost of petroleum-based farm inputs and even has promoted chemical farming instead of training farmers to be more self-reliant and go organic to reduce their production cost.

"We are calling on the farmers to hold on to their palay and leave some for their household consumption so they will not buy rice for their own needs especially in the coming months when the prices will be more unbearable for them," said Tadeo.

FOREGONE SUBSIDY

Sen. Francis Escudero said government spending for imported rice to prevent a shortage would reach P58.7 billion this year, P21.7 billion of which would be in foregone subsidy.

Escudero explained that if the imported rice costs around P29.40 a kilo and will be sold by NFA retailers at P18.50 per kilo, the P10.90 per kilo difference will be the "political premium" the Arroyo administration will have to pay to offset the perceived lack of rice.

Government paid $707 per ton for the 335,000 metric tons it bought this month. This means the 2 million metric tons government plans to bring in this year will cost P58.7 billion, based on a P41.50 to $1 exchange, which is still higher than the official forex forecast, he said.

Of this amount only P37 billion can be recouped, "assuming completely zero trading, storage and transport losses," Escudero said.

The estimated import price tag, Escudero said, assumes no tax or duty paid, which is 40 percent of imported value under the country's WTO commitments, a rate which, however, can be waived if food shortage is invoked.

EQUIVALENT TO VAT

Escudero estimated that the P58.7 billion required to import rice is equivalent to what government can collect from the value-added tax (VAT) on fuel this year.

"To give you an idea how big it is, it's bigger than the budget of the AFP or the PNP, and five times the allocation for DOH," he said.

"Taxes collected at the gas pump will just be swapped for rice. The rise in the world prices of rice, which translates into bigger corporate subsidy for NFA, was never factored in this year's expenditures," he said.

As a result, the plan to have a balanced budget this year "is in peril," he said.