COMMENT The Malay Economic Action Council (MTEM) and Malay Rice Millers Association Malaysia (PPBMM) consider the proposal to temporarily suspend the (Super Tempatan) ST15 Rice Subsidy Programme as inappropriate and want the move to be reviewed.

The programme, which began in 2008, is aimed at helping more than three million low-income households to obtain rice at a cheaper price. The government allocates RM528 million each year, through the Agriculture and Agro-based Industries Ministry, as payment to Bernas for the subsidy programme.

The government has also provided supplies of 15 percent broken rice subsidy (ST15), totalling 40,000 tonnes per month, for Peninsular Malaysia, while Sabah and Sarawak are allocated 20,000 tonnes.

In our view, recommendations made by the Public Accounts Committee (PAC) chairperson Nur Jazlan Mohamed to temporarily suspend the ST15 programme will not solve the problem, and may even negatively affect millions of consumers and more than 15,000 retailers because the real issue has yet to be addressed with much success.

This ‘suspension’ had previously been implemented late last year, when the Padi and Rice Regulatory Division (KPB) in the Agriculture Ministry decided to audit the list of appointed wholesalers, which led to disruptions in the ST15 market.

The real issue still revolves around the granting of quotas to wholesalers who are not properly monitored.

This fact is acknowledged by Agriculture Minister Ismail Sabri Yaacob ( right ) and was the subject of his debate in Parliament last year, during which Ismail affirmed his ministry’s commitment to ensure that only qualified contractors are given quotas to mill ST15.

Ismail also ordered that all 600 licensed wholesalers undergo another interview or vetting process. As a result, almost 30 wholesalers were found guilty of not adhering to the regulations.

Bernas has exclusive rights in rice

It is well known that rice production capacity in the country can only meet 70 percent of the local demand and Bernas has been given exclusive rights to import rice to make up the shortfall. Prolonged problems such as dumping or lack of local ST15 rice supply in the market can be contained if the entire supply chain is better controlled.

One of the factors that inhibit the efficient implementation of the ST15 programme is the problem of imported rice flooding the local market. Unscrupulous parties take advantage of the cheaper price of imported rice, compared with local rice, to mix them both during the packaging process to be sold at market price while still claiming government subsidy on ST15.

Consequently, imported rice smuggling has become rampant; and it can even be assumed that the actual percentage of rice import quotas far exceed the 30 percent allowed by the government. At the same time, the fate of the miller may also be affected if the ST15 programme is delayed yet again as they are also participants of the Centralised Rice Procurement Scheme (SPB) and Drying and Grinding Scheme (SUMK).

Acts regulating the ST15 programme ensure that the ST15 can only milled by bumiputera millers at the guaranteed price of RM2,100/tonne, compared with market prices.

Sufficient time to improve SOP

MTEM and PPBMM believe that the ST15 Rice Subsidy Programme can be continued without enforcing the period of suspension as the selection of contractors for April and May has already been determined and given to holders of the existing quota.

While waiting for the grant of new quotas in June, the Padi and Rice Regulatory Agency (KPB) would have sufficient time to improve and enforce the standard operating procedure (SOP) accordingly.

Some of the recommendations proposed by MTEM and PPBMM to streamline the SOP in the rice supply chain in order to be really comprehensive and effective are:

1. Review the licensing quota to each wholesaler. This can actually be managed by the KPB of each state as they would be able to discern or assess more effectively the integrity, capacity and performance of local wholesalers and manufacturers.

2. Empower local padi and rice industry players through these implementations:

a. Packing and packaging is done at the milling stage. This will allow KPB to better monitor Ali Baba wholesalers who do not have processing and packing facilities to smuggle rice and sell it in the local market. At the same time, this additional packing and packaging duties can add to the miller’s income and enable better cost control in processing padi to rice.

b. Increasing the contract duration of the ST15 programme from monthly to a longer period will allow millers and wholesalers to better manage their production process. Millers with the capacity to pack rice up to 200 tonnes per month can be given contracts to do so, while smaller wholesalers without the packing facility can send it to larger factories.

c. At the supply chain stage, retailers and stores that supply the ST15 rice should be appointed directly by KPB. This is to ensure that criminal activities such as hoarding rice or mixing rice that does not adhere to the established standards set by the authorities. KPB can also benefit from the goods and services tax (GST) system implemented recently, because supplies and sales activities can be monitored more effectively.

The padi and rice industry is an important part of the National Food Security Policy. Valued at more than RM7 billion a year, this industry should be managed and monitored more effectively and transparently.

Any effort to gain extra profit, monopolise, hoard, mix rice and abuse government subsidies is deemed an act of treason to the country and its people and should be given the heaviest of penalties.

MOHD NIZAM MAHSHAR is president/CEO of the Malay Economic Action Council (MTEM), and MUSONNEF MD RADZI is president of the Malay Rice Millers Association Malaysia (PPBMM).