Noy opts for populist moves amid ratings fall

With his survey ratings fast declining, President Aquino yesterday launched a major offensive to earn brownie points through a directive to his economic team to study populist measures such as a wage increase for private sector employees, a reduction of value added tax (VAT) on oil, and the imposition of price controls on basic commodities which moves are no different from the populist maneuvers of the past administration to raise ratings and woo voters. Aquino denounced the Arroyo administration for making similar moves that led to the worsening situation in the government budget.

The Aquino administration is looking at a budget deficit of P290 billion after a record P314 billion fiscal gap last year.

Aquino in his speeches had referred to decisions of the past administration borne out of political necessity, for the worsening of the fiscal situation, particularly the decision of former President Arroyo to cap electricity charges by deferring power purchase adjustment (PPA) collections owed to independent power producers (IPP) that resulted in the bloating of the debts of state power firm National Power Corp. (Napocor).

He also criticized subsidies on rice prices which he said resulted in the piling up of the losses of grains agency National Food Administration (NFA).

Aquino claimed Arroyo stopped power rate increases in 2004 “because that was an election year.”

He, however, never complained about this move of Arroyo then, as he ran under her ticket, being her ally.

He added in a speech that every and all decision of Arroyo always had a political component, which normally was in conflict with sound economic practices.

With a double-digit plunge in a recent performance rating survey, however, Aquino seems to be embarking on the same road as Arroyo’s.

He told reporters yesterday that his administration is looking at “every possible long-term solution that would help the general public cope with the effects of the spiraling oil prices brought by the unabated political turmoil in North Africa and the Middle East.”

Aquino, however, clarified that he doesn’t want to make false promises to the public and so his decision will be determined by the outcome of the studies being conducted by the members of his economic team that will reach his table hopefully by next week.

Aquino said the Public Transport Assistance Program (PTAP) which will provide fuel subsidy for jeepney and tricycle drivers that is now being implemented by virtue of Executive Order 32 that he signed recently, was just the first out of all the possible measures they are exploring.

Aquino emphasized that he wants his economic team to arrive at “true solutions” and not the so-called “pa-pogi” (popular) solutions toward mitigating the impact of the continuous rounds of oil price hikes to the most vulnerable sectors.

“I would not want to make false promises but, in general, I don’t think that’s the correct solution,” Aquino said when sought to clarify his position on the reduction of VAT on oil. “Again, the criterion is on the focus, there’s a tendency of veering away from that focus which, in turn, makes it unclear whether we are helping the targeted sector. So unless there is contravening data, then we will look at it.”

Aquino explained that reducing VAT would result to a domino effect that would affect the country’s fiscal situation so the government has to come up with a more feasible solution directly responding to the needs of the sectors concerned. 

Meanwhile, shedding light into what could be perceived as ‘ambitious’ statements made by Aquino, Budget Secretary Florencio ‘Butch’ Abad said the government would definitely look into all the possible measure with due consideration to the country’s fiscal position.

Speaking on behalf of his fellow economic managers, Abad said he was initially “concerned” on the proposals which Aquino wanted them to look into especially the reduction of VAT on oil given the government’s need to raise its revenues.

“Well, he has no specific instructions on what measures are we going to study although he just mentioned about this reduction in VAT (on oil). But the general reaction of the economic managers is that it will impact adversely in the fiscal position of the government apart from the fact that it will not target the sectors that need it most,” Abad explained in a separate interview.

“You know were facing a P300-billion deficit cap, obviously the answer is we need to raise more revenues,” he added.

As to the wage increase, Abad expressed understanding on the President’s concerns for the private sector employees who carry the biggest burden since they are not covered by the Salary Standardization Law whose promises of wage adjustments are made exclusive only to government employees.

Abad said the President wants his economic team to develop plans that could answer the woes of the minimum wage earners but the Budget chief admitted that they are still clueless as to how they will approach this problem.

“As a matter of principle, he (Aquino) understands that insofar as the private sector employees are concerned, they’re carrying a burden because in the case of the public sector, we are currently implanting the third phase of the SSL3 (salary standardization law) so they’re enjoying adjustments in their wages. But as to the private sector, that is what he wants us to study. The mode is something that also has to be looked into but no particular mode has been discussed,” Abad said.

While Aquino vowed to study measures to reduce prices of commodities, electric bills are again bound to increase this month as announced by the Manila Electric Co. (Meralco).

A House member said the the recent Meralco rate increase is an attempt to further raise profits and flagellate the Filipino people weeks before Good Friday.

Eastern Samar Rep. Ben Evardone said that the move was nothing but a bid to exploit the onset of summer amid the unabated fuel price increases.

“The one-two punch power rate and fuel price increase is an early ‘penitensya’ for Filipinos. Holy week is still three weeks away but the people are already suffering the burden of unabated power and fuel hikes,” Evardone said.

Everdone charged that oil companies and power firms have been taking on the opportunity to cash in on the wave of conflicts in the Middle East.

“Oil companies should not exploit the crisis in the Middle East to further increase their profits. For their part, Meralco and other generation companies should not make the onset of the summer season as an excuse to increase power rate,” the Eastern Samar lawmaker said.

He said that the rate increases imposed by Meralco has been going every summer despite the absence of any justification.

“It has become a vicious cycle for Meralco and other generation companies to increase their rates every summer. Now that we will have a ‘wet’ summer according to Meralco, they have no basis for the increase. I think the new power rate has no basis. Masyadong maagang kalbaryo ito sa mamamayang Pilipino,” he said.

Speaker Feliciano Belmonte, earlier, said that a review of the Electric Power Industry Reform Act (Epira) is in order.

Belmonte said that the House of Representatives will have to assess the implementation of the Epira Law in the aspect of competition in the power generation sector; operation of the Wholesale Electricity Sport Market (Wesm); privatization of Napocor’s generation and transmission assets; stranded costs; IPP contracts; and new generating capacities.

Earlier, Evardone said that petitions for power rate hikes would have been unnecessary had Power Sector Assets Liabilities Management used the earnings from the privatization of the National Power Corporation.

Evardone maintained that Psalm has generated $10.6 billion from the privatization of Napocor.

“Psalm should explain to the public where the $12.1 billion from the sale of the 91.8 percent of the NPC asset went,” Evardone said.

Bayan Muna Rep. Teddy Casiño said that Congress should remove the VAT on power or VAT on sustems loss. It should also remove or reduce royalty on natural gas used by power plants.

He said that Congress can use its oversight powers in replacing the ERC’s performance-based pricing scheme to a more equitable return on rate base system; Remove or reduce VAT on oil & petroleum products; Act on measures repealing & replacing the Oil Deregulation Law with a more pro-active regulatory framework toward eventual nationalization of the oil industry. Gerry Baldo,Aytch S. de la Cruz, Daily Tribune