Manufacturers could raise SRP of basic goods only if justifiable, says DTI

Trade and Industry Secretary Ramon Lopez (File photo by GRIG C. MONTEGRANDE / Philippine Daily Inquirer)

Amid new and higher taxes, manufacturers could still raise the suggested retail price (SRP) of basic goods and commodities only if the increase would not go beyond what is “justifiable,” the Department of Trade and Industry (DTI) said.

In a press briefing on Thursday, DTI Secretary Ramon Lopez said the new excise tax rates on fuel would have a “very minimal” impact on the over-all cost of production. Therefore, manufacturers are expected to absorb the cost and not pass it on consumers.

However, manufacturers still have the freedom to raise the SRPs if they see fit. This is because DTI has implemented last year a policy that allowed such companies to change SRPs even without the approval of the government.

For now, the government does not see any reason to change that policy, opting to keep the status quo at least until the price movement has become “drastic.”

“We thought about that in the last two days,” Lopez said, when asked if DTI considered bringing back the government’s pre-approval process for SRPs as a proactive measure against profiteering.

“Unless we see a reason, I might not bring it back yet. There is no need. Because of the minimal change, we are confident prices would not move. But if there is drastic movement, there is need to bring it back,” he said in a mix of English and Filipino.

In spite of concerns raised by industry groups, the government passed the TRAIN law late last year, lowering the personal income tax of many Filipinos at the expense of increasing consumption taxes on cars, coal, fuel, and sweetened beverages, among others.

The government clarified that the new tax rates in this case would only apply to fresh stocks of fuel and beverage. Old stocks are still under previous excise tax rates. The new rates are expected to be applied within the month.

Under the TRAIN, an excise tax of P2.50 per liter would be imposed on diesel and bunker fuel starting this year. This would go up to P4.50 in 2019 and P6 in 2020. The excise tax on gasoline would be increased from P4.35 per liter to P7 this year and then to P9 in 2019, and P10 in 2020.

Once the new rates have been applied, Lopez said the excise tax on fuel would affect the transportation cost of manufacturers, but this would only account for less than five percent of the over-all production cost, a negligible amount.

DTI rules still allow manufacturers to raise prices.

Under current rules, an individual manufacturer of canned sardines, for example, could still hike its SRP. But this would be at the expense of losing market share, Lopez said, since consumers would shift instead to rival companies with cheaper products.

However, Lopez said DTI would step in once many manufacturers increase their prices, even at varying rates. Monitoring teams across the country are watching prices for any questionable movement.

The trade chief said a price increase must not go beyond the justifiable rate. However, what passes for a justifiable increase depends on the kind of product in the market.

DTI’s Consumer Protection and Advocacy Bureau (CPAB) had computed the effect of the fuel excise tax on the SRPs of basic necessities and prime commodities. A copy of the computation was provided to media.

The data showed that only cement would have a price increase exceeding P1. A cement bag with a weight of 40 kilograms has a current SRP of P205. The excise taxes would increase the SRP by P1.57 to P206.57

Other products would have an increase of a few centavos. For example, a 155-gram can of sardines has a current SRP of P13.45. This would only shoulder a four-centavo increase once new tax rates kick in.