Thursday, 27 March 2008 3:16 PM

Govt. should actively Promote Competition in and Substitution for Rice

It is gratifying to learn that the Government will introduce new fiscal measures in the 2008 budget. This would be including increase excise duty on tobacco and beer, increase gaming tax, and abolition of import duty on rice. The increased tax imposed on tobacco, beer and gaming activities are long overdue as they have induced social and health problem to individual, families, and in turn become a burden to Government budget. The intention of the increase is clear and commended. I am sure the gain from these increases would more than offset the revenue loss from abolishing import duty on rice.

The intention to cause a marginal reduction on the price of rice through abolition of import duties charged is also welcome, but only if it would actually be translated into a consequential reduction in retail price. Further this measure should only be seen as temporary. In the long run the Government can achieve similar result for the people by pursuing a policy that aims to see competition in rice industry. Further, through its agriculture initiatives that are supported by donors the Government should pursue and target an outcome whereby families eat more local staples such as kumara, taro, cassava, and etc. One adverse consequence of abolition of duties on rice is that, rice will relatively be cheaper than the local staples. This will encourage further consumption of rice and less of local staples. This is a disincentive to the production of local staples leading to reduction to the income of local farmers.

An unintended consequence of scraping duties on rice is therefore as follows: cheaper rice, more consumption of rice, and higher profit to rice importer and producers. On a opposite lane cheaper rice will lead to less consumption of local staples, and finally reduction to the incomes of local farmers. I imagine the Government would not want such a scenario to occur.

So what are other policy options available to control the price and consumption of rice while increasing the consumption and production of local staples? May I leave this to another discussion? If this interests you please contribute to assist our agriculturalists and economists.

Disclaimer: The views and opinions expressed in this letter/article are those of Judas Gelu and do not necessarily reflect the official policy or position of Solomon Times Online.

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