NOW that the nation has settled down to the grind of daily living, lets get back to the issue regarding the controversy on sugar prices. As our readers will recall, the planters and the Sugar Regulatory Administration took the Department of Trade and Industry to task for not imposing a retail price cap on sugar that are selling at P60 per kilo. The planters and SRA claim there are manipulators.
Furthermore, they claim that some members of the Philippine Chamber of Commerce and Industry are buying sugar at a high price without complaining. The protestors believe that the action of DTI and PCCI in effect supports the demand for liberalization of sugar imports. Imported sugar is cheap and if allowed would be detrimental to the industry.
The claims thus point to the invisible manipulators as the culprits that lead to nowhere in search of solution. The search for the manipulators runs in circles.
However before we deferred the discussion due to the elections, I mentioned the April 24 advertisement. It was unsigned but with characteristics of previous ads related to issues in the sugar industry.
The data cited by the advertisement show that our national production is insufficient to supply our needs. I had been saying this along for years warning of this eventuality because production is declining in the face of the constantly increasing consumption.
Despite this reality, the SRA continues to allocate certain portions of our production to the United States, in effect, reducing further the shortage for national consumption. To prevent this shortage, the SRA authorized importation.
The scheme is anomalous. Simply put: we have an actual shortage due to declining production and rising consumption and allocation to the United States, but SRA and several planters groups continue to oppose import liberalization and raising the threat of death of the industry. On the other hand, SRA issues authority to import.
There is no logic in the situation except the high possibility of corruption. Does import and export permits mean money for SRA or whoever is favored with this authority?
The data from the ads which are confirmed by merely checking the SRA website, support the theory that SRA is manipulating supply and demand and hiding behind the death of the industry threat that a lot of people swallow.
Importation is now a reality but SRA wants to control it, but why? The ads cited above gives us a glimpse of an answer.
If the SRA stops allocating A sugar for the US, there will be enough locally produced sugar and the planters will receive more. The B or domestic sugar has a higher price than A or US destined sugar. Depending upon the percentage of the allocation (it changes every crop year), the planter is paid what is called composite price, the average between the higher priced B and the lower priced A.
Just a simple illustration: A planter produces 100 bags. The price of B is P1,000 per bag and that of A is P900. If SRA allocates 5% to A, then the 95% (or 95 bags) is paid P95,000 while five bags is paid, P4,500. The composite price is thus P99,500. If SRA allocates all the planters sugar as B, the planter receives P100,000 for his produce. In effect, the SRA system of allocating for A despite a national shortage deprives the planter P500 per bag for his effort.
We are citing here 100 bags of sugar. Lets say the country produces two million tons. That means 40 million bags. How much is P500 multiplied by forty million? That is the amount the sugar producers lose every year.
The advertisement has a simple recommendation to prevent bleeding of the producers: stop allocating A, meaning there will only be one class of sugar and no more composite price.
The authorized importation keeps the national supply situation afloat and the price steady. So why demand an end to liberalization? The probable reasons are twofold: liberalized importation takes the authority from SRA, and secondly, SRA has favored businessmen who trade with A.
Of course, importation readily forces sugar prices to drop. However, if all the sugar produced in this country is for our use, the need for importation lessens.
However, even if all our sugar is for domestic use but costlier than imported sugar, the situation will not change for the better.