The P20 Rice Crisis

In his fourth State of the Nation Address, President Ferdinand R. Marcos Jr. doubled down on the Benteng Bigas Meron (BBM) Na program, insisting that P20/kilo rice is both achievable and sustainable. 

“Napatunayan na natin na kaya na natin ang bente pesos sa bawat kilo ng bigas nang hindi malulugi ang ating mga magsasaka,” Marcos claimed. Yet behind the political appeal lies the troubling reality that this promise requires massive subsidies that strain public finances and distort the rice market

The P20/kilo na bigas program was the signature campaign promise of Marcos Jr., but its appeal goes beyond politics. Rice, after all, provides almost half of the nation's calorie intake and is a key driver of inflation, retail prices averaging P40-45 per kilo, even spiking over 20% year-on-year during supply shocks. With the Philippines also being the world’s top rice importer, global market swings directly hit consumers. In this context, the policy was framed as a way to stabilize food prices, ease inflation, and offer relief to households heavily burdened by rising costs. 

Structural Mechanics

The BBM Na program is operationalized through the KADIWA Centers. Department of Agriculture Memorandum Circular No. 37 serves as the guideline for the implementation of these centers where the government sells the subsidized rice to local communities. The Department of Agriculture partners with local government units, national government agencies, the private sector, and farmers and fisher folk associations/cooperatives to act as program consolidators and suppliers of the KADIWA centers.

The program operates as a commodity subsidy allowing the government to sell rice to low-income households at P20/kilo. In layman's terms, this means the government is deliberately lowering the retail price consumers pay below the true market price. 

To make this work, The National Food Authority (NFA) buys palay from farmers, priced at P23-30/kilo for dry palay, and P17-18/kilo for wet palay. The process of milling roughly halves the yield, effectively doubling the production costs. Then, the gap between the actual cost of rice and the subsidized price is shouldered by the Food Terminal Inc. (FTI) and local government units (LGUs) using taxpayer peso.  

To date, P4.5 billion in contingency funds from the Office of the President has financed the program’s pilot implementation, with a proposed additional P113-billion budget from the Department of Agriculture to expand it nationwide. 

Economics of Subsidies 

The economics behind this arrangement expose its unsustainability. Unlike targeted cash transfers with a fixed payout, commodity subsidies are open-ended: the government continues paying the difference between real costs and the fixed P20 retail price, regardless of how high global or domestic prices rise. Using the World Bank’s estimated cost multiplier, the state spends an additional P150 for every kilo of P20 rice sold, meaning the true cost to taxpayers is P172 per kilo. The larger the volume distributed, the steeper the bill.

This burden escalates as supply constraints mount. The NFA’s buffer stocks are finite, and once local production can’t catch up or stocks deplete, the state must rely on imports, again upping the fiscal burden. That means the subsidy grows even larger, locking the government into an “explosive” subsidy spiral where the fiscal bill balloons with every kilo sold.

Without a cap on per-unit subsidies or mechanisms to adjust price ceilings, the P20 rice policy becomes fiscally unsustainable. Every peso spent here is an opportunity cost: billions funneled into holding down rice prices could instead support productivity programs, infrastructure, or social services.

Market Consequences

While the fiscal burdens highlight why the program is unsustainable for government finances, its distortions on the rice market reveal a second layer of fragility. Artificially cheap rice creates ripple effects on both demand and supply that strain the system further.

On the demand side, the subsidy stimulates excess consumption. At P20/kilo—around half the average price of P40-45—eligible households have driven excess demand, creating long lines and rationing at Kadiwa centers. Yet because coverage is limited, there are households forced to buy regular market prices.  As such, IBON Foundation points out that there is a dual market, one segment accessing artificially cheap rice, and another, often just as vulnerable, bearing the brunt of high prices. 

On the supply side, the benchmark set by the P20 promise exerts downward pressure on farmgate prices. Farmers who sell outside the NFA’s procurement network face private traders reluctant to buy palay at price that would translate into prices over the P20 retail price. Bantay Bigas warns this could disincentivize production, as farmers earn less for their harvests. This could potentially lead to reduced domestic supply in future cycles.

The result is long-run instability. Commodity subsidies risk hollowing out domestic production. If farmers cut back, imports must cover the gap, which raises the subsidy bill further and exposes the country to global volatility. Consumers face shortages; farmers face unprofitable returns; and the government becomes trapped in a vicious cycle of deeper subsidies and greater distortions.

Policy Alternatives

The long-term solution to high prices lies not in commodity subsidies, but in expanding productive capacity and strengthening market linkages. As Senator Kiko Pangilinan emphasized, “Hindi bumababa ang presyo ng bigas dahil nga kulang ang supply,” Addressing this supply gap requires shifting from consumption subsidies to producer-oriented support.

An alternative to the BBM Na Program is the Sagip Saka Act, which was signed into law in 2019. This law seeks to improve the productivity and profitability of farmers and fisherfolk through skills development, provision of production inputs, credit assistance, provision of access to technologies, and marketing support. It allows LGUs and agencies to bypass the bidding process and directly purchase rice from farmers at a negotiated price, for  operations such as relief operations and rice allowances for government employees.

Through these government initiatives, farmers and fisherfolk are able to improve their productivity and competitiveness in the market, thereby bringing market prices down as more efficient producers compete with one another. This approach obviates the need for unsustainable government subsidies by relying instead on market mechanisms that  improve productivity and competition putting natural  downward pressure on the price of rice. 

The BBM Na program was designed to win hearts and ease wallets. But the economics are clear: it is a fiscally unsustainable policy that burdens taxpayers, distorts markets, and risks undermining the very farmers it claims to support. 

Sagip Saka offers a better path. By investing in productivity, protecting farmer incomes, and letting market forces drive price stability, it avoids the subsidy spiral and builds resilience. Rice may be central to Filipino life, but securing its future requires sustainable solutions—not temporary fixes. 

Disclaimer: The views expressed by the authors are their own and do not necessarily reflect the official views of the organization, department, or the university. Any errors or omissions are the sole responsibility of the authors. 

References

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