Riddle

Our rice policy has long been an unsolvable riddle.

On one hand, the policy seeks to improve the incomes of rice farmers to keep them interested in the crop. On the other hand, the policy seeks to bring down the costs of the commodity to keep consumers happy.

The twin goals are contradictory. The policy is a formula for failure.

Rice has not been the road to wealth for our farmers. To the contrary, it proved a poverty trap. This is the reason why the average age of our rice farmers hovers at about 60. No one wants to plant rice anymore.

There is no way we can aspire for self-sufficiency in the crop if the rice farmers start dying out.

On the other hand, consumers do not want to pay more for the commodity. The benchmark for rice pricing has always been the NFA’s price setting for substandard, weevil-infested imported rice. But that is a pricing level possible only because it is heavily subsidized from procurement, to storage and finally to distribution.

Over so many years, the expectation has been for the NFA to supply enough cheap rice to the domestic market. This is not the NFA’s mandate. Its mandate is to maintain a buffer stock to guard against calamities and shoo away price speculators.

Because of the expectation on the NFA to supply all the cheap rice needed, and to defy the laws of the market to do this, the agency has run deep into debt. Today the agency owes lenders billions it cannot possibly hope to pay unless more subsidies are extended to it.

Incompetence and corruption are merely icing on the cake. The NFA has an impossible mission to begin with.

The other day, the NFA has been taken to task for using money allotted for procurement in order to pay down debt. To compound this, the DOF reports that NFA procured only a fraction of the palay it was funded to procure. The result of both is the supply crisis for cheap rice.

I am sure the NFA can find enough excuses for doing what it did. If the agency did not pay down debt, they would run into financing problems shortly. Mandated to buy palay at P17 per kilo, the NFA could not possibly be competitive in the market. In a word, no lender will extend loans to the agency and no farmer will want to sell their crop to the NFA.

Price expectations will push us deeper and deeper into a rice crisis. If we want ample supply, we should be prepared to pay more for it. The Japanese do this, acknowledging that being an archipelago forces higher costs on their rice farmers. Consumers simply conceded they have to pay more to keep their farmers planting.

Mismanaged

On one end of the spectrum of problems facing our power supply is the possibility our installed generating capacity could fall short of demand a few years from now. On the other end, some distribution utilities are so mismanaged they end up wasting the power generated.

Zamcelco, the electric cooperative supplying the needs of Zamboanga City, might well be the textbook case for the latter problem.

When last measured, Zamcelco maintains a systems loss of 22.09%. That is nearly twice the systems loss cap of 13% set by the Energy Regulatory Commission.

With such a massive systems loss ratio, it is understandable that Zamcelco loses money and incurs debt. The electric cooperative is buried in about P2.145 billion in debt to power suppliers. This includes a P373.897 million loan extended by the National Electrification Administration (NEA) only last month to keep power flowing to the city.

The consequences of mismanagement could spread very quickly.

The Western Mindanao Power Corp. has been pounding on Zamcelco’s door. Unless they immediately pay P122 million of its P500 million outstanding debt to the power supplier, the generation company could not buy fuel for its diesel plant to keep the city supplied. That could throw the city into darkness.

Alarmed at the imminent possibility of a crippling blackout, the citizens of Zamboanga City pushed their mayor and their congressman to intervene. The political leaders managed to convince the National Electrification Administration (NEA) to take over the management and operations of Zamcelco until such time the cooperative concludes an investment management contract (IMC) with a private sector partner.

Anticipating more problems like the one Zamcelco created, the NEA issued a memorandum last month prohibiting other electric cooperatives from being parties to another cooperative’s IMA. This avoids clear conflicts of interest.

On Aug. 24, 2018, the Zamcelco special bids and awards committee decided to extend the opening of bids to Sept. 10. The NEA team agreed with the extension to enable prospective bidders to improve on their offers to get the best possible deal for the coop.

However, Zamcelco president Omar Sahi unilaterally decided to open the bids from only two bidders last Aug. 30. The Zamcelco board then issued a resolution dissolving the special bids and awards committee and appointed itself to the role.

Omar Sahi and his board, last Aug. 30, declared a winning bid.  In that hasty and haphazard process, the winning bidder happened to be partnered with another electric cooperative. This is in total defiance of the guidelines issued by the NEA.

The NEA could either stand by its memo or yield to the very characters that had run Zamcelco to the ground. The greater possibility is that the people of Zamboanga City will lose power very soon – in both senses.