MANILA, Philippines--Last Oct. 13, Agriculture Secretary Arthur Yap said he would not control the price of vegetables. At the same time, he favored price control on basic necessities, such as sugar and eggs. Why the difference? Is price control a blessing or a curse?

Price Act

When I was DTI undersecretary, I was part of a team that helped formulate the Price Act (R.A. 7581) promulgated on Feb. 15, 1993.

Section 2 of this law states: ?It is the policy of the state to ensure the availability of basic necessities and prime commodities at reasonable prices at all times, without denying legitimate business a fair return of investment.? We note that business is given the opportunity to have a fair return, or else the supply of good may just disappear.

The Price Act offers two options. The first is to declare as illegal acts of price manipulation, such as hoarding and profiteering. The second is to impose automatic or mandated price control, especially during calamities.

During a state of calamity, the law stipulates: ?Prices of basic necessities within an area shall automatically be frozen at their prevailing prices or placed under automatic price control.? This automatic feature applies only to basic necessities defined in the law, including but not limited to products, such as rice, canned fish, coffee and sugar.

However, for prime commodities defined in this law, including noodles, onions, garlic, school supplies, cement and steel wires, price control is not automatic. It is required that the President first impose a price ceiling upon the recommendation of the implementing agency or the Price Coordinating Council (PCC).

This differentiation is needed. For basic necessities, action should be swift and, thus, automatic. For prime commodities, time is given to the implementing agency or PCC to recommend the appropriate action.

Since 1986, only the option of automatic price control on basic necessities has been used. For prime commodities, the option used to catch profiteers was not price control but the Price Tag Law, which is substantially incorporated in the Price Act.

Blessing or curse

If properly implemented, price control can indeed be a blessing. It punishes profiteers who take advantage of consumers, especially during a calamity. It also deters retailers from unjustly increasing their prices because of the penalties imposed.

On the other hand, if the price ceiling is made too low, the retailer would rather not sell the product instead of losing money. The result is much worse. There would simply be no supply. A lot, therefore, depends on determining the correct price ceiling.

Over the last few days, there have been complaints about the fairness of price ceilings for some agricultural and industrial goods. It was said that these ceilings were determined through the monitoring done by government personnel as the average price for the last three months.

Determining price ceilings

However, aside from the issue of whether the monitoring was properly done, the Price Act identifies this ?average price? method as only one of three other price determination factors that ?may be taken in consideration: The supply available in the market; the cost to the producer, manufacturer, distributor or seller ?; and such other factors or conditions, which will aid in arriving at a just and reasonable price ceiling.?

Because of the perceived urgency of imposing price ceiling on prime commodities, the required public hearings and dialogues with the private sector required in the Price Act?s Implementing Rules and Regulations (IRRs) were not sufficiently done.

Therefore, some price ceilings turned out to be unreasonable, such as a product?s retail price ceiling, which was lower than its ex-plant price. Or a product?s price ceiling in the city made compulsory for a faraway municipality, when transport costs are obviously different.

We commend those government agencies willing to correct these price ceilings. We also support the announcement last weekend that price control will no longer be implemented in the Visayas and Mindanao, where there is no serious calamity.

Price Tag Law

We recommend the supplementary measure of strict Price Tag Law implementation all over the country. This requires retailers to put price tags on all their products. This way, those charging excessively high prices can be charged with profiteering, using a given suggested retail price for a given area as a point of comparison. This also empowers the consumer to choose the most reasonable offer, which is a built-in market mechanism for retailers to lower their prices as they compete for the consumer?s peso.

Given the spirit of the Price Act, we believe Secretary Yap used good judgment in supporting price control for sugar and eggs, but not for vegetables. Price control can indeed be either a blessing or a curse. But we should also implement the Price Tag Law, which is most often a blessing, and a curse only to profiteers.

(The author is chair of Agriwatch, former secretary for presidential flagship programs and projects, and former undersecretary for agriculture, and trade and industry. For inquiries and suggestions, e-mail agriwatchphil@yahoo.com or telefax (02) 8522112.)