CAGAYAN DE ORO CITY – A farmers’ group has debunked claims that the government has been heavily subsidizing the Philippine Crop Insurance Corporation (PCIC) over the years as it criticized the move of the Duterte administration to transfer said agency from the Department of Agriculture (DA) to the Department of Finance (DOF).
The Federation of Free Farmers (FFF), in a statement on Wednesday, September 29, clarified that the purported subsidies were essentially government contributions to the premiums for crop insurance policies issued to farmers.
Raul Montemayor, FFF national manager, said that the PCIC charges a premium to cover expected claims from farmers arising from crop losses.
“This premium,” he said, “is divided among the parties who have an insurable interest or stake in the insurance policy – the farmer who stands to lose his crop, the lending banks which may be unable to collect from the farmer, and the government which is duty-bound to help farmers recover in order to sustain the country’s food supply. The government’s so-called subsidies are actually payments for its share in the total premium.”
The federation’s reaction came after Finance Secretary Carlos Dominguez III announced that the government has extended P23.2 billion in subsidies to PCIC over the last 20 years.
Dominguez said that “this trend is not sustainable” and cited the need to stem the “financial hemorrhage” of the corporation.
Upon his recommendation, Pres. Rodrigo Duterte issued Executive Order 148 on September 14, 2021, allowing the transfer of the PCIC to ensure that “government assets and resources are used effectively.”
Montemayor said fund transfers to PCIC increased in recent years due to government’s decision to fully cover the premiums for marginal and non-borrowing farmers and to expand the program’s coverage to other sectors like livestock, which have been affected by the African Swine Fever (ASF) disease.
Supplemental funding, he added, came from mandatory allotments under specific laws, such as the Agri-Agra Law, and from budgetary allocations from Congress.
The FFF warned that removing government’s premium shares, as proposed by Dominguez, will result in higher premiums for farmers and discourage them from securing crop insurance. Banks in turn will find it risky to lend to uninsured farmers.
“Under these conditions, private firms are unlikely to enter the crop insurance business. Moreover, almost all crop insurance programs in the world are directly or indirectly supported by governments due to the inherent risks in agriculture,” Montemayor said.
Regarding PCICs alleged losses, the farmers’ federation noted that the corporation is financially stable and generates extra earnings from investments to cover its overhead. The agency is also protected from extraordinary large claims through re-insurance.
The FFF said further that Dominguez’ proposal to expand insurance coverage to other crops, livestock and farm assets was already being implemented by PCIC.
Notably, the PCIC was adjudged as the top government-owned and/or controlled corporation for the past four years and has been remitting dividends to the government from its net income from operations.
On the PCIC’s transfer to DOF, the federation argued that the crop insurance is a critical component of the DA’s food production programs.
The group added that the crop insurance provides compensation for farmers whose crops are damaged by typhoons and other natural calamities, or whose farm animals die due to disease like the ASF.
“Without crop insurance, banks will find it too risky to lend to farmers, and farmers will find it very difficult to pay their loans, much less recover from calamities. It is therefore very important that the coverage and services of the program are synchronized with the plans and strategies of the DA. Under the DoF, the priority will shift to fiscal and monetary concerns which may not necessarily be supportive of the needs of farmers and the DA,” Montemayor said.
The FFF also questioned the lack of consultation with farmers and other stakeholders on the PCIC transfer despite clear provisions in the Magna Carta for Small Farmers (RA 7607).
Even the DA itself, which the EO says was among those who recommended the transfer, did not inform, much less consult, its constituents.
The FFF urged Congress to revisit Republic Act 10149, or the GOCC Governance Act of 2011 which was invoked under EO 148 as the basis for transferring PCIC to the DoF.
Section 5 of the Act authorizes the President to reorganize government owned and controlled corporations (GOCCs) like the PCIC upon the recommendation of the Governance Commission for GOCCs.
“We recognize that the bureaucracy may need to be reorganized and streamlined from time to time. However, this should be done with proper consultation with affected stakeholders and also the legislators who crafted the charter of the GOCC involved. Otherwise, the Executive can easily subvert the original purpose for which the GOCC was created.”, said Montemayor.
He noted that the same law was invoked in transferring the National Irrigation Authority (NIA), and for a time, the National Food Authority (NFA), to the Office of the President even though these GOCCs are clearly more related to the DA’s functions.