Don’t look now but the much heralded possible collapse of the tobacco industry as a consequence of the sharp hike in excise taes for cigars and cigarettes following the enactment of the so-called Sin Tax Reform Act or R.A. 10351 in 2012 has not materialized.
Three years into the implementation of the new sin tax law that also affected alcohol products, the tobacco crop’s feared elimination from the agricultural landscape looks far from happening. More farmers are raising the ‘golden leaf’ and more farm areas are being planted with the tobacco crop . The country’s largest cigarette manufacturing company has even initiated new areas for Virginia tobacco farming in Mindanao in addition to traditional ones in Northern Luzon.
Saying they were scared by what could happen to their livelihood, farmers in the northern region where tobacco is chiefly grown had vigorously opposed the sin tax legislation while it was undergoing deliberation in Congress.
They had encamped on the Senate grounds while taking turns to stage protest actions before the Senate building when the controversial measure was being tackled. They considered their livelihood doomed if the Aquino-sponsored tax bill passed the congressional wringer. “This is the end of the tobacco industry,” an emotional Bernard Vicente,vice president of the Philippine Tobacco Growers Federation, told newsmen after the enactment of the measure.
He expressed fear that big cigarette manufacturers and tobacco trading companies would be forced to close shop and shift their operations to other countries consequently affecting demand for locally produced tobacco. “ If they don’t make money here, who can stop them from doing business in a “friendlier” country,” he asked.
The traders and representatives of manufacturing firms had earlier given warnings on the revenue bill’s alleged disastrous effect on the industry once it gains legislative fiat. They had also called on the legislators to convey their opposition.
Some groups including those from the anti-smoking and health sector advised the leaf farmers to shift to corn, cotton, sugarcane and other agricultural crops. The farmers, however, were reluctant knowing that none of the alternative crops could guarantee or match the income they get from tobacco which is oftentimes referred to as ‘golden leaf.’
The tobacco crop had been giving their families stable footing and ready cash at most times especially when they urgently need it such as during an emergency and enrollment periods when their children go to college or high school. In many cases, a tobacco-farming family would have to support two or three kids attending college at the same time. The golden leaf is pretty much bankable so that tobacco traders are always on hand to provide what they need. The money is deducted from the proceeds of their harvest during trading.
Some observers think growers of the golden leaf are privileged species. The tobacco crop usually yields them good earnings. This is bolstered by a floor price-setting scheme that is arranged by the National Tobacco Administration (NTA), an agency of the Department of Agriculture, in consultation with the farmers and traders every two years. The floor prices arrived at during the tripartite negotiation for each tobacco type and grade assure the farmers they end up earning rather than losing as the conferees factor in farming expenditures like the prevailing prices of farming inputs, fuel, and labor costs. On top of that, field buyers traditionally purchase the leaf harvest at prices higher than the declared minimum prices as the quality of the produce usually dictates the eventual prices of the leaves.
That is why it’s easy to understand why the farmers turned emotional, even hysterical, because of the perceived threat to their livelihood when RA 10351 was tackled and passed. But, as it is turning out, the flame of engagement with the cash crop in the farming villages remains burning as trading companies and manufacturers continue to signify their leaf requirements and proceed to beef up their inventories every trading period.
NTA records showed that the number of farmers planting tobacco jumped from 52,610 in crop year 2011-2012 when the controversial law was still under consideration to 53,959 in 2013 when the tax law was first implemented.
The increase in tobacco farmhands continued when the government slapped the cigarette tax hikes for the second year in 2014 with 55,763 farmers participating.
Similarly, farm areas devoted to tobacco-growing broadened. From 36,160 hectares three years ago, production areas expanded yearly to 37,021 hectares in 2013 and 38,495 hectares last year. The figures indicate that the industry drew an additional 2,335 hectares of land planted with tobacco from 2012 to 2014.
“Certainly, the hike in cigar and cigarette taxes did not create havoc on the tobacco industry,” Dr. Robert Bonoan, NTA operations manager told this writer in a phone interview recently.
“It’s business as usual,” he said as he disclosed that industry giant Philip Morris Fortune Tobacco Manufacturing Corp. has opened up a new haven for Virginia leaf production in Claveria, Misamis Oriental.
Claveria farmers posted a yield of 1-million kilos in their first commercial production that were disposed during this year’s trading, he said. Bonoan revealed that tobacco can be grown twice a year in the area given the good climate and soil condition in Claveria.
Overall, Bonoan said that leaf buyers and trader-representatives of manufacturers procured 70 million kilos of tobacco leaves–Virginia, burley and native–in this year’s trading season.The volume represents the production output of the farmers for the 2014-2015 crop year, a record yield compared with the tobacco acceptances in the previous three years of trading.
NTA data indicated that 64.77 million kilos valued at P4.62 billion were traded in 2012, 67.6 million kilos worth P4.66 billion in 2013 and 65.16 million kilos costing P4.63 billion last year.
With business as usual prevailing, Vicente and his colleagues are no longer in panic mood but in high spirit. “ We are very happy over the turn of events, We did not expect it and we thank God”, he said. # (Teddy P. Molina)