PRICE CAPS ON PROFIT MARGINS VS PRICE CEILING

2018-10-04 00:00:00

Trade department evaluating caps on margin for agricultural goods
October 3, 2018 | 10:15 pm
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Ramon M. Lopez
TRADE SECRETARY RAMON M. LOPEZ ? PHILSTAR
THE Department of Trade and Industry (DTI) said it may recommend to President Rodrigo R. Duterte a cap on the margins that can be earned on the sale of certain agricultural commodities.
Trade Secretary Ramon M. Lopez said the cap will be based on farmgate prices ? the cost to acquire the produce from farmers ? and will fluctuate depending on the movement of farmgate prices.
?We know the farmgate price (so) we should (have) a cap on margins at retail.. In a way you?re imposing a price cap, but it?s a moving price cap,? Mr. Lopez told reporters on the sidelines of an event in Taguig City.
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Mr. Lopez emphasized that the proposed price ranges will be adjusted as often as weekly, to keep in step with farmgate prices.
He was responding to questions about the progress of government measures to bring down retail prices.
Mr. Lopez said the margin cap has been proposed to economic managers who will discussed the matter within the week.
The DTI said it is fine-tuning the proposal with the Department of Agriculture, which has its own set of suggested retail prices for farm goods.
He added that the DTI will have to verify whether Mr. Duterte Administrative Order 13 allows capping of profit margins.
AO 13 only authorizes the streamlining of the import process for agricultural commodities.
Margin caps are also not authorized under Republic Act 7581 or the Price Act of 1992.
Laban Konsyumer, Inc. President Victorio Mario A. Dimagiba, a lawyer, said the proposal has ?no basis? in law.
?The (Price Act) sets criteria and that should be observed,? Mr. Dimagiba, also a former DTI undersecretary, said in a mobile message on Wednesday.
Mr. Dimagiba said he prefers price ceilings.
Under the law, a price ceiling can be imposed in case of calamities, emergencies, or a finding of ?artificial or unreasonable? price increases, on orders from the President, acting on the recommendation of the National Price Coordinating Council chaired by the DTI.
The DTI has expressed reluctance to resort to price ceilings due to the possibility that suppliers might withdraw their goods from the market if they cannot realize profits from their sales.
Mr. Lopez believes that inflation, which hit 6.4% in August, is driven by supply issues.
On rice, the DTI has proposed that private traders be allowed to import rice in exchange for a commitment to sell the grain at P38 per kilogram at retail for grades of rice commonly purchased by low-income consumers.
According to the Philippine Statistics Authority, the price of well-milled rice averaged P48.93 per kg in the second week of September, up 15.73% from a year earlier and up 1.1% from a week earlier.
Regular-milled rice retail prices rose 20.26% year-on-year and 0.97% week-on-week to P45.71 per kg. ? Janina C. Lim

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