Evaluating the Rice Tariffication Law: Pros and Cons
The debate surrounding the Rice Tariffication Law (RTL) continues to divide opinion in the Philippines, six years after its implementation. Advocates argue that the law has the potential to benefit both farmers and consumers, while critics question its effectiveness in light of rising commodity prices, particularly the cost of rice, one of the country’s staple foods. Enacted in 2019, Republic Act No. 11203, also known as the Rice Liberalization Act, replaced the country’s quantitative restrictions on rice imports with a tariff-based system. The government believed that this shift would make the rice market more competitive, ultimately lowering prices. Additionally, tariffs collected from imports were intended to be reinvested into local agriculture, supporting modernization and innovation.
In December 2024, President Ferdinand Marcos Jr. introduced a revision to the law, extending the Rice Competitiveness Enhancement Fund (RCEF) also known as Rice Fund until 2031 and tripling the government’s support for farmers, from ₱10 billion to ₱30 billion. However, despite these adjustments, rice prices remained persistently high, prompting the declaration of a food security emergency in early February 2025, even as global rice prices dropped and tariffs were reduced (Reuters, 2025). This policy review aims to assess the effectiveness of the RTL, analyzing its outcomes in terms of benefits and challenges for Micro, Small, and Medium Enterprises (MSMEs) and consumers in 2025.
Just after the enactment of the Rice Tariffication Law in 2019, the Philippine Rice Research Institute (PhilRice) published a Frequently Asked Questions (FAQ) document to clarify common misconceptions and outline the benefits for various stakeholders. The report explained why the country was shifting to a tariff system, highlighting that limited supply of goods, such as rice, in the market leads to higher prices. The previous quantitative restrictions on rice imports, which were politically driven, often resulted in delays or low volumes of rice imports, causing price spikes that directly affected consumers.
In their report, PhilRice (2019) outlined the law’s potential benefits for different groups, including consumers, farmers, taxpayers, workers, children, and the poor. On the consumer side, they predicted that under the tariff system, the price of rice would drop by ₱2 to ₱7 per kilogram. They also emphasized that one in three Filipino children under the age of five would benefit from better nutrition as rice became more affordable. Additionally, they believed the law would significantly improve overall societal welfare, as the reduction in rice prices would relieve financial pressure on low-income families, making rice more accessible and affordable at all times.
For market players, the report argued that the law was a win-win for farmers. Not only would they benefit from lower rice prices, but the tariffs collected from rice imports would be allocated to the Rice Competitiveness Enhancement Fund (RCEF). This fund would be used to enhance agricultural productivity, with specific allocations for: 1) Rice farm mechanization; 2) Inbred rice seed development, propagation, and promotion; 3) Expanded rice credit assistance; and 4) Rice extension services (Department of Agriculture, n.d.).
In short, the government aimed to reduce rice prices by liberalizing the market, allowing the private sector to import rice from other countries subject to a tariff. This approach was believed to enhance food security, as business decisions would respond to changes in market demand. The law also intended to stabilize the rice market by reducing reliance on imports and empowering local farmers through tariff revenue. In theory, this would lead to lower rice prices for consumers, more competitive market conditions, and reinvested funds from tariffs to support local agriculture. Over the years, the pros and cons of the law have become evident through various reports. Some of the reported benefits are outlined below, along with reactions to the program from different stakeholders.
In its first year of implementation, a study by the Federation of Free Farmers, as reported by De la Cruz (2020) in Business Mirror, stated that farmers suffered ₱40 billion in losses due to the decline in palay prices. The group acknowledged that they would initially be affected by the surge in rice imports, which they recognized would make the market more competitive and lower market prices. However, they argued that the promised retail price drop did not materialize. They believed that the actual price decline occurred as early as September 2018, before the Rice Tariffication Law (RTL) took effect the following year. According to their report, they argued that the government had overstated the expected price reduction: “The average well-milled rice (WMR) prices were higher by only ₱0.03 per kilo, while regular-milled rice (RMR) prices were lower by ₱0.05—a far cry from past assurances that prices would drop by ₱7 to ₱10 and that some imported rice would even sell below the NFA-subsidized price of ₱27.” (Federation of Free Farmers, as cited in De la Cruz, 2020). Based on the statement of the said group, it is evident that the opening of the free market has taken a toll on domestic production of rice.
Years after its implementation, the government has demonstrated how the Rice Fund has positively impacted Filipino farmers through the tariffs collected from rice imports. Cash aid has been distributed, along with farm machinery and loans to local farmers. From 2019 to 2024, Landbank released PHP 2.89 billion in loans to nearly 65,000 rice farmers through the Expanded Rice Credit Assistance under the Rice Competitiveness Enhancement Fund (Sun Star Davao, 2025). Additionally, the Philippine Center for Postharvest Development and Mechanization (PHilMech) successfully distributed farm machinery to 6,385 farm cooperatives and associations, benefiting nearly 1 million members (Sevillano, 2024).
In 2023, the Philippine News Agency reported that 6,558 farmer-beneficiaries in Bago City, Negros Occidental, were eligible to receive PHP 5,000 each under the RCEF for that year (Guadalquiver, 2024). In October 2024, PHilMech expressed its support for a proposed PHP 9-billion annual allocation for the mechanization program under the extended RCEF. As of October 2024, Landbank had disbursed a total of PHP 769.68 billion in loans to the agriculture sector, supporting more than 3.93 million small farmers and fishers nationwide (Santos, 2025). Just recently, as reported by Fos (2025) from the Philippine Information Agency, citing the Department of Agriculture, the DA provided financial assistance amounting to PHP 36,843,300 to 5,226 small-scale rice farmers in Romblon. This aid was aimed at providing timely funds to support their farming needs and enhance productivity.
Although there have been instances where benefits were provided to farmers, rising commodity prices have persisted. Reports indicate that progress has been slowed due to issues such as delays, inventory discrepancies, and the pricing of equipment intended for small-scale farmers. In a 2023 news report by Inquirer.Net, a comparison of farm mechanization over nine years revealed only a 16% increase, despite significant investment. This increase is seen in the comparison of 2.31 horsepower per hectare (hp/ha) in 2013 to 2.68 hp/ha in 2022. In the same article, FFF National Manager Raul Montemayor suggested that the distributed machines may not be properly maintained and could become underutilized after a few years. The low prices of palay, exacerbated by excessive imports and rising fuel costs in the Philippines, have discouraged some farmers from investing in machinery unless it is provided for free. There are also regional disparities in mechanization levels across the country. For example, Cagayan Valley reported a mechanization rate of 3.51 hp/ha, while the Bangsamoro Autonomous Region in Muslim Mindanao reported a much lower rate of 0.93 hp/ha (Lagare, 2023).
Farmers have also reported delays in the distribution of seeds financed by the Rice Competitiveness Enhancement Fund (RCEF), with some receiving mismatched varieties that do not align with their preferred stocks (Halili, 2024). Furthermore, the low disbursement rate of funds by the Philippine Center for Postharvest Development and Mechanization (PhilMech) has been flagged by the Commission on Audit for the fiscal year 2023. Only 7.62% or P388.58 million of the P5.10 billion allocated for that year has been disbursed, with the department attributing the delay to incomplete billing documents from suppliers (Basilio, 2024). Additionally, there have been allegations of procurement irregularities regarding overpriced farm tractors acquired by PhilMech. The Kilusang Magbubukid ng Pilipinas has called for an investigation into the agency’s purchase of four-wheel tractors at P1.298 million each, which exceeds the P1.2 million budget approved by the Department of Budget and Management (Rivera, 2022).
Weighing the pros and cons of the Rice Tariffication Law (RTL) has been an ongoing discussion since its enactment, particularly regarding whether it truly addresses the problem of food insecurity and whether it effectively supports and empowers local farmers. In 2021, in response to critics of the law, Noel Reyes, the former Department of Agriculture (DA) spokesperson, communicated to the Philippine News Agency that starting in November of that year, 1.6 million Filipino rice farmers, tilling land areas of two hectares or less, would receive a share of the PHP 7.6 billion excess tariff collected from rice imports over the past two years, as outlined in the RTL (Cudis, 2021). However, according to BusinessWorld, as reported by Ordoñez (2024), farming groups have renewed their call to repeal the law for the following reasons: The Philippines has become the world’s top rice importer for the past four years under the RTL. They argue that over-reliance on imports makes the country vulnerable to volatile global prices, especially since rice is a basic commodity for the masses. Additionally, they contend that the law’s impact on local farmers is devastating, as farm gate prices have caused them immeasurable losses while they struggle to compete with the prices of imported rice.
In the context of Micro, Small, and Medium Enterprises (MSMEs) as stakeholders in the new rice market, it is important to identify which categories of enterprises are benefiting from the liberalization of the rice market in the country. These categories include small and micro farmers who belong to the informal sector of agriculture and rural areas, as well as larger-scale formal farmers, who can be categorized as part of the Small and Medium Enterprises (SMEs). Additionally, market intermediaries such as palay traders, millers, wholesalers, retailers, importers, and middlemen also belong to the SME sector, with larger market shares.
The distributional economic impacts of the Rice Tariffication Law (RTL) on the Philippine domestic rice market were studied by Estadilla (2022) using partial equilibrium analysis, which examined how supply and demand interact with the policy. The study found a significant reduction in domestic rice production because farmers faced lower paddy prices, leading some to switch to other crops. However, during that year, there were signs of positive benefits for consumers, as rice became more affordable.
In a macroeconomic sense, the study suggested that RTL improved market efficiency, with gains in government revenue outweighing losses, such as the decreased producer surplus and gains in consumer surplus. The study highlights that, despite the overall increase in efficiency and the benefits to consumers from lower rice prices, small-scale farmers were negatively impacted due to income losses, raising equity concerns. Estadilla further explained in the model that small-scale farmers, who constitute the majority, experienced larger percentage reductions in income compared to large-scale farmers.
Another report published on Inquirer.net, titled “Who Benefits from Rice Imports?”, was conducted by a farmers’ group led by Montemayor, the national manager of the Federation of Free Farmers. Montemayor argued that, in reality, market intermediaries who act as intermediaries between local farmers and general consumers are the primary beneficiaries of the Rice Tariffication Law (RTL). He drew on data from the Philippine Statistics Authority (PSA), covering the years 2017-2020, to show the differences in retail, import and wholesale rice prices before and after the enactment of RTL.
Figure 1. PSA Data Tracking Rice Retail and Wholesale Prices (Montemayor, 2025)
Montemayor explained that while the intended benefits of the RTL were supposed to trickle down to consumers, in reality, only market players benefitted. Wholesale prices decreased, but retail prices either remained the same or even increased. To quote the article, Montemayor stated: “While wholesale prices did go down following the enactment of RTL, retail prices did not decrease proportionately, and the margin between wholesale and retail prices actually increased. In other words, middlemen pocketed most of the gains from cheaper imports while giving only loose change to consumers” (Montemayor, 2021).
These competing arguments regarding the policy are all valid, as the data comes from the different perspectives of various stakeholders. However, behind these benefits and arguments, a significant number of controversies have emerged from the latter part of 2024 up to the present, especially amid the ongoing food security crisis for rice. On April 29, 2024, House Speaker Ferdinand Martin Romualdez stated that they would investigate traders and middlemen due to the significant difference between farm gate and retail prices (Lalu, 2024). Then, in December 2024, the House of Representatives requested that the National Bureau of Investigation (NBI) investigate the potential role of middlemen in price manipulation of basic commodities, including rice. During this time, House Deputy Majority Leader and Iloilo 1st District Representative Janette Garin asked Agriculture Secretary Francisco Tiu Laurel Jr. to clarify which agency was responsible for monitoring middlemen in the rice market. In response, the cabinet official admitted that there was no specific government office tasked with this responsibility (Cervantes, 2024). More recently, on February 12, 2025, as reported by GMA Regional TV News (2025), an NBI raid uncovered an alleged rice repacking scam in which old rice was mixed with imported rice and sold as new in Bucao, Bulacan. This incident highlights a deeper issue: the lack of oversight on the role of traders and middlemen in the liberalized rice market.
While the Rice Tariffication Law (RTL) had clear objectives to reduce rice prices and improve market efficiency, the lack of oversight regarding food fraud and scams, such as repacking old rice as new, along with unregulated traders, remains a significant gap. Recent events, such as the NBI raids and hearings on the role of big market players, have exposed the absence of agency and highlighted the limits of laissez-faire and free-market economics. In this context, larger businesses and traders dominate the rice importation sector, while smaller players struggle or are squeezed out.
The absence of oversight and monitoring agencies, as noted in recent House of Representatives hearings, is particularly alarming. It allows issues like artificial scarcity to arise, which directly affect small-scale farmers and other sectors—many of whom are also consumers. Around 1.1 million of the 2.9 million rice farmers and farm workers in the Philippines are smallholders, planting less than one hectare, and most of them are net consumers of rice.
Only time will tell whether, after many years of implementation, the law will live up to its promise of lowering rice prices and enhancing the agricultural sector. However, one thing is certain: it is urgent to constantly review not only the law and its benefits but also the lack of protections under the current framework. A more holistic approach to governance is needed to ensure transparency, fairness, and equity in the rice market, with better support for smaller businesses and farmers to help them succeed and keep up in an increasingly competitive market.
References
Basilio, K. C. (2024, June 6). P1.2-B PhilMech inventory flagged. BusinessWorld Online. https://www.bworldonline.com/the-nation/2024/06/06/600223/p1-2-b-philmech-inventory-flagged/
Cervantes, F. M. (2024, April). NBI ordered to name individuals behind rice price manipulation. Philippine News Agency. https://www.pna.gov.ph/articles/1239775
Cudis, C. (2021). DA silences critics with RTL long-term benefits. Philippine News Agency. Retrieved February 21, 2025, from https://www.pna.gov.ph/articles/1159130
De La Cruz, J. M. (2020, August 26). RTL in first year: P40-billion losses for farmers, minimal gains for consumers—FFF study | Jovee Marie N. de la Cruz. Business Mirror. https://businessmirror.com.ph/2020/08/26/rtl-in-first-year-p40-billion-losses-for-farmersminimal-gains-for-consumers-fff-study/
Department of Agriculture. (n.d.). Rice Competitiveness Enhancement Fund (RCEF). Retrieved February 19, 2025, from https://rcef.da.gov.ph/rcef/
Estadilla, R. J. C. (2022). ECONOMIC IMPACTS OF RICE TARIFFICATION LAW ON THE PHILIPPINE RICE DOMESTIC MARKET. 28(1). http://issaasphil.org/wp-content/uploads/2022/06/7.-Estadilla-2022.-Rice-Tarification-Law-FINAL.pdf
Fos, P. J. (2025, February 5). Over 5,000 Romblon rice farmers receive assistance from DA. Philippine Information Agency. https://pia.gov.ph/over-5000-romblon-rice-farmers-receive-assistance-from-da/
GMA Regional TV News. (2025, February). NBI uncovers warehouse with old imported rice in Bulacan. GMA Network. https://www.gmanetwork.com/regionaltv/news/106582/nbi-uncovers-warehouse-with-old-imported-rice-in-bulacan/story/
Guadalquiver, N. (2024, June). 6.5K farmers in Bago City get P32.8-M financial aid under RCEF. Philippine News Agency. https://www.pna.gov.ph/articles/1226665
Halili, A. (2024, August 8). Farmers cite delays in RCEF seed distribution. BusinessWorld. Retrieved February 21, 2025, from https://www.bworldonline.com/economy/2024/08/08/613057/farmers-cite-delays-in-rcef-seed-distribution/
Lagare, J. B. (2023, June 19). PH rice farm mechanization remains slow | Inquirer Business. INQUIRER.net. https://business.inquirer.net/406205/ph-rice-farm-mechanization-remains-slow
Lalu, G. P. (2024, April). House to summon traders, middlemen for next House probe. INQUIRER.net. https://newsinfo.inquirer.net/1935019/house-to-summon-traders-middlemen-for-next-house-probe-on-agri-prices
Montemayor, R. (2021, February 24). Who benefits from rice imports? INQUIRER.net. https://business.inquirer.net/318329/who-benefits-from-rice-imports
Ordoñez, J. V. (2024, September 8). Group seeks repeal of Rice Tariffication law. BusinessWorld Online. https://www.bworldonline.com/the-nation/2024/09/08/619687/group-seeks-repeal-of-rice-tariffication-law/
Philippine Rice Research Institute. (2019). FAQs Rice Competitiveness Enhancement Fund. In PhilRice. Retrieved February 19, 2025, from https://www.philrice.gov.ph/wp-content/uploads/2019/09/RCEF_FAQ02-RiceTariff.pdf
Reuters. (2025, February 3). Philippines declares “food security emergency” to tame retail rice prices. Reuters. https://www.reuters.com/world/asia-pacific/philippines-declares-food-security-emergency-tame-rice-prices-2025-02-03/
Rivera, D. (2022, September 9). PHilMech backtracks on overpriced tractors. Philstar.com. https://www.philstar.com/business/2022/09/10/2208569/philmech-backtracks-overpriced-tractors
Santos, J. (2025, January). Landbank disburses ₱2.9B to 65,000 rice farmers, backs RCEF extension. Manila Bulletin. https://mb.com.ph/2025/1/6/landbank-disburses-2-9-b-to-65-000-rice-farmers-backs-rcef-extension
Sevillano, S. (2024, October). P9-billion annual mechanization fund to boost rice production. Philippine News Agency. https://www.pna.gov.ph/index.php/articles/1235053
Sun Star Davao, S. S. D. (2025, January 8). Landbank releases P2.9B in loans for farmers under RCEF. SunStar Publishing Inc. https://www.sunstar.com.ph/davao/landbank-releases-p29b-in-loans-for-farmers-under-rcef
Jay Tolentino is a junior Social Work student at the UP College of Social Work and Community Development with a keen interest in the informal economy, its development paradigms, and sustainability. He is currently a student assistant at the UP Institute for Small-Scale Industries (UP ISSI) Director’s Office, where he contributes analytical pieces and business features on micro, small, and medium enterprises (MSMEs) in the Philippines. His insights in this article are his own and do not reflect the official stance of the Institute, as he is one of UP ISSI’s guest writers engaged in its publication initiatives.