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National Tobacco Administration (NTA)
Annual Report for CY 2015

Amidst formidable challenges which were foreseen to exert adverse impact on the local tobacco industry, (to include, aggressive global campaign against tobacco and smoking, increasing health consciousness, increasing domestic taxation, e.g. R.A. 10351, and Increasing import liberalization and global competition),the NTA continued to be aggressive in its performance to fulfill its twin mandate, to improve the lives of our tobacco farmers and all those who depend on the industry for their livelihood and to promote the balanced and integrated growth and development of the tobacco industry to help make agriculture a solid basis for industrialization, resulting to some significant feats in the development of the local industry, for the ultimate benefit of its stakeholders, especially the tobacco farmers.

It is worth noting herewith that, the industry provides livelihood and sustenance to about 2.9 million stakeholders, including the more that 800,000 tobacco farmers and their families; generatesenormous revenues for the Government in the form of taxes, amounting to PhP68B in 2013, which increased to more than PhP73B in 2014, (more than PhP80 B,if we includeother fees and duties), which help fund its education, health, welfare, infrastructure and economic programs over the country; and, earns and savesdollars for the country, estimatedat an average of US$344 M from 2011-2015.

TOBACCO INDUSTRY'S PERFORMANCE FOR 2014-2015

The local tobacco industry, in the recent years, has been faced with great challenges due to confluence of events, as follows:

1. With the enactment of the R.A. 10351 (Sin Tax Reform Law), the cigar/cigarettes manufacturers were compeIled to upgrade their products to match increasing prices.

They have become increasingly discriminating in quality in buying leaf tobacco from the farmers (losing the market for low grade leaf tobacco).

The excise tax will continue to increase, unify at PhP30/pack in 2017, and increase further at 4% every year thereafter.

The industry therefore is in the period of technological and marketing adjustments, necessitating adequate and urgent support for our tobacco farmers, to meet demanded quality by the manufacturers.

2. Weather conditions continue to be uncooperative. The hope to recover from the extreme dry condition that affected the tobacco crop of 2014-2015 continued with the threat of the El Nio occurrence that will coincide with, and will intensify throughout the tobacco season 2015-2016.

Amidst above challenges, interventions and production/technical assistance as may be necessary were extended, enabling the agency to cushion some of their adverse impact on the part of the small tobacco farmers, as follows:

1. Number of tobacco farmers and tobacco farm area (in hectares) decreased by 17% and 6%, from 55,763 to 38,264 and 46,531 to 35,997 hectares, respectivelyfor the period, 2014-2015;

2. As shown in the table below, volume of production across all types (Virginia, Burley and Native tobacco) was at an average of 51million kilos(valued at PhP3.378 billion), adecrease of 26%, from 2014's 69 million kilos, due to the above-said unfavorable weather condition. There was a slight increase in average buying price, however, at 1%, from PhP70.87 per kilo in 2014 to PhP71.58 per kilo in 2015. Documentation for the tobacco production/acceptances in Mindanao is still on-going.

  2013-2014 2014-2015
TobaccoType Volume (M Kgs)  Value (B PhP) Volume (M Kgs) Value (B PhP)
Virginia 33.261 2.314 27.209 1.786
Burley 21.120 1.711 16.510 1.265
Native 14.345 0.845 7.450 0.540
Total 68.727 4.871 51.169 3.591
Data source: NTA Regulation Dept. as of Dec. 2015

3. Revenue from excise taxes on tobacco products increased by 32% from PhP75.51 billion in 2014to PhP100.02billion in 2015,with the implementation of the R.A. 10351 or the Sin Tax Law (reports from BIR/DOF);

4. Exports of unmanufactured leaf tobacco decreased by 5% from 38 million kilos in 2014 to 37 million kilos in 2015, with the corresponding 14% decrease in value, from US$156 Million to US$135 Million, respectively.

5. Imports of unmanufactured leaf tobacco likewise, decreased by 5%from 38 million kilos in 2014 to 37 million kilosin 2015, with the corresponding 14% decrease in value, from US$156 Million to US$135 Million, respectively.

PERFORMANCE BY PROGRAMS/PROJECTS/ACTIVITIES

The Agency's programs and projects are anchored on its Strategy Map and OPIF Logframe,with the societal goal of "rapid, inclusive, and sustained economic growth", its sectoral goal as stated in the Medium Term Philippine Development Plan (MTPDP) 2011-2016, "competitive and sustainable agriculture and fisheries sector"; and, in response to its intermediate outcome of "sustained viable tobacco industry".The following projects are considered as having contributed to improving to the lives of its stakeholders, particularly the tobacco farmers:

MFO 1: Production Assistance:

Integrated Farming and Other Income Generating Activities Project (IFOIGAP)- Market-Driven Quality Tobacco Production:

a. Tobacco Contract Growing System (TCGS)

TCGS is a market-oriented production system that assures the tobacco manufacturers and exporters of the volume and quality of tobacco they need; and, at the same time, assures the farmers of the technology, production assistance, technical assistance from seedbedding to delivery of produce, ready market, proper grading, accurate weighing and better prices for their produce, including incentives for good performance, like production quota, 100% delivery, prompt repayment and high nicotine, among others.

For crop years 2015-2016, NTA assisted a total of 4,072 tobacco farmers, an increase of 9% from 2014's 3,727 farmers. The total production assistance extended was PhP49 million. Likewise, NTA also facilitated the release of production assistance provided by Tobacco Buyer Firms, GFIs and LGUs to 1,313tobacco farmers.

Yield per Hectare

Across all types (Virginia, Burley & Native), the average yield increased by2%, from 2,258 to 2,298kilograms/hectare in 2015.

Net Income per Hectare

Overall, the average net income of the tobacco farmer increased by 12%, from PhP56,902 per hectarein 2014 to PhP63,443 per hectare in 2015 (Data source: FTSD, with reports from Branch Offices ).

b. Rice Production component

As an IFOIGAP component, this is implemented in line with the rice self-sufficiency program of the government led by the DA, to augment the income of tobacco farmers, by increasing their yield to at least 5 tonsper hectare.For CY 2015, NTA provided production assistance to 2,586 tobacco farmers, 32% higher than 2014's 1,959. Production Assistance totaled PhP19.63 million, lesser by5% from 2014's PhP20.66 million.

c. Agripinoy Tobacco Farmers' Food Processing and Trading Center(2013-2015)

The IFOIGAP includes value-adding/processing, where in 2012, the NTA established the Agripinoy Tobacco Farmers Food Processing and Trading Center (Agripinoy Project). The project provides production assistance to tobacco farmers in the production of raw materials- hogs and poultry, which the Plant buys and processes into bagnet, Vigan longaniza, tapa, bacon, etc. and sells to Bagsakan Centers, govt. offices and hospitals in Region 1, 2 CAR and Metro Manila. The Agripinoyproject includes a milling complex, which will start operation in 2016, to cater to the requirement primarily of the farmer-beneficiaries of hog fattening and broiler production.

With regard to its Hog Fattening Project component, a total assistance of PhP43.65 million wereextended to 544 farmer-cooperators.As a contribution to the food sufficiency goal of the DA, the food processing plant produced a total of 173,777metrictons (mt) of fresh meat, 73mt of processed meat, 2,505 mtof dressedchicken, for CY 2015.

d. Renewable FuelwoodEnergy Farm Project and Restoration of Ecological Integrity of the Tobacco Growing Regions

The project, which was provided a total of PhP90 million, 2015,from the NTA's entitlement of the Tobacco Fund (RA 4155), aims to address the fuelwood and other forest resources requirements of the farmers in the curing of Virginia and other types of tobacco, as well as assist in the reforestation efforts of the tobacco growing regions.

For the Kahuyang Pangkabuhayan at Pangkalikasan (KPP) or grow-out module, a total of 4.1 million treeswere planted to an area of 1,651hectares. For KPP bamboo, 543 hectares were planted with 100,000 bamboo seedlings.2,763farmer-cooperators benefitted from the project.

Another component of the project is theSynchronized Tree Planting Day, an inter-agency and inter-sectoral action for the restoration of ecological integrity, where about 1.3 million tree seedlings were planted, by a total of 105,629 participants from national and regional government agencies, local government units, schools, church and civil society groups, in various areas in Regions 1, 2 and CAR.

e. Irrigation Support Project for Small Tobacco Farmers (ISPSTF)

Thisis a critical component of market-driven quality tobacco production (addressing requirement for export and import substitution); and, food sufficiency program of the government. The project was provided a budget of PhP437.5 million was approved by the Department of Budget and Management (DBM) in December 2014, and implemented in 2015, with a total of 56 Communal Irrigation Systems (CIS) projects funded in various municipalities in Region 1 and CAR. A supplemental budget was also released in the total amount of PhP296.8 million for the funding of 42CIS projectsto cover the Virginia tobacco-producing provinces of Region I and CAR, to benefit an estimated5,160 tobacco-farmer beneficiaries, covering a potential area of 3,340 hectares.

MFO 2 - Research and Development Services

Under the Industrial Research, the studies on finding alternative uses of tobacco, focusedon the Demonstration Trials on the Application ofTobacco Powder Water Extracts in Controlling Pestsof Mango and Eggplant. The tobacco powder/dust, using the on-site extraction technology, was tested by the 12 farmer cooperators in various eggplant and mango plantations in Region 1. The results/recommendation of the technology verification trial proved that Tobacco Leaf Extract (TLE) was proven effective for the control of sucking insects in eggplant and mango hoppers. The farmer-cooperators claimed that the extract-treated eggplant grew bigger and robust as compared to those sprayed with insecticide. Higher yield was also obtained from eggplant and mango trees (reports from the Product Devt. Division, Industrial Research Dept.).

Studies were also conducted for standards and quality assurance: 1) Annual Physical and Chemical Evaluation of Philippine Grownand Imported Tobacco Leafand2) Annual Physical and Chemical Evaluation of Manufactured Tobacco Products (Cigarettes). The first study involves evaluation/analysis of tobacco leaf samples in terms of physical (maturity, body, color, etc.) and chemical characteristics (nicotine, reducing sugars, etc.), the results of which were presented to NTA TPROs, agriculturists and farmer leaders during the annual seminars/workshops on leaf grading standards. The second study was conducted to determine the presence and levels of hazardous chemicals/carcinogenic substances in tobacco and tobacco products, as part of NTA's regulatory function, showed that cigarettes under the premium-priced brand had the lowest level of nicotine, tar and carbon monoxide compared to medium-priced brand

Under Agricultural Research, results of two studies were incorporated in the technology manual, such as, 1) Use Prevathon against common insect pests of tobacco and their natural enemies, and 2) Use of Anawang Furnace for flue-curing Virginia tobacco.

Other researches conducted for Production Technology Development/Enhancement included the following:

  • Tobacco Germplasm Colection, Purification, Maintenance and Characterization;
  • Effect of Nitrogen Levels on Seed Yield of Tobacco;
  • Effect of Vermicompost and Soil/Plant Stimulants on Seedling Growth, Yield and Quality of Neutral Flavor Flue Cured Tobacco;
  • Yield and Quality of Neutral Flavor Flue Cured Tobacco as Affected by Flowerhead Removal and Additional Irrigation under Farmers Field Condition; and
  • Farmers Verification of the Ricehull-Fed Furnace Automatic Feeder on Virginia Tobacco Flue Curing.

MFO 3: Regulatory Services

This program involves the exercise of regulatory authority of the NTA, to include the supervision of tobacco trading operations,the setting up of floor prices for tobacco through the conduct of the biennial tripartite conference, the implementation of regulatory procedures on the redrying, preliminary processing of tobacco leaf, and the regulation of importation and exportation.

On the aspect of monitoring/enforcement, the NTA assures equitable trading to include, accurate weighing, proper grading, proper pricing, prompt payment and proper documentation, pursuant to existing rules and regulations.

In the exercise of its regulatory activities, improvements are likewise achieved in theissuance of licenses to 36 trading centers,285 field representatives; issuance of import and export permits/clearances/commodity inspections to 17 wholesale tobacco dealers and redryers, 59 tobacco exporters and importers and 14 cigar/cigarette manufacturers. As of 2015, 91%of the trading centers, 95% of exporters/ importers/transhippers, and 93% of the manufacturers were found compliant to regulatory conditions/rules.

Other Priority Programs and Projects

Tobacco Seed Production and Distribution

The NTA makes available market-preferred, quality seed varieties to tobacco farmers and tobacco companies, to replace the many, old, degenerated varieties the farmers are using. This is intended to enhance global competitiveness, by ensuring consistency in the volume and quality, of leaf tobacco, as required by local cigar/cigarette manufacturers and exporters. For CY 2015, a total of 92 kg. of seeds were distributed to about 7,600 tobacco farmers.

Analytical Services

NTA has laboratories at NTA Research and Training Center in Batac, Ilocos Norte and at the NTA Central Office, Quezon City- Quality Assurance Laboratory

Annually, in addition to requests from the various sectors that are being responded, the NTA's quality assurance activities include the following:

  • Continuing monitoring of soil fertility, chloride determination and water quality of major tobacco growing areas
  • Fertilizer and pesticide analyses
  • Monitoring/Analysis of Physico-Chemical Quality of Tobacco Production, using various technology applications, across locations
  • Monitoring of quality of tobacco leaf and tobacco products being exported and imported

Scholarship Program for Tobacco Farmers Dependents (pursuant to RA 9211)

For the year, the NTA continued the scholarship program for tobacco farmers' children, pursuant to RA 9211, Tobacco Free Education Program (TFEP) and in affirmation to the Administration's thrust of giving priority to the primary stakeholders of the industry, the tobacco farmers. As of date it has extended financial assistance to the new batch of 293 scholars, enrolled in 4-year and vocational/technical courses, in state colleges and universities in Regions I, II and CAR.

Communication Support Program

  • Conducted continuing active consultation with the tobacco private sector and tobacco farmers groups on matters affecting the local tobacco industry, amidst the global campaign against tobacco and smoking, including the legislative agenda in both houses of congress;
  • Implemented the "Oras ni Mannalon ti Tabako" radio programs in 6 provincesfor a more active information dissemination and consultation, and reach out to far-flung areas of the regions; and,
  • Distributed 14,800 technokomiks/technocalendars to tobacco farmers; published a quarterly "Tobacco News" and regularly hold press conferences with the media.

Human Resource Development

  • Provided trainings in various critical competencies to the 316 employees;
  • Provided health services, cultural and sports activities for he employees;
  • Maintained/upgraded the agency infrastructure and facilities.

Planning and Information Technology Management Services

  • Formulated guidelines for the agency's Strategic Performance Management System (SPMS);
  • Facilitated conduct of trainings for SPMS, Quality Management System for ISO-9001:2008 Certification of the Agency with DAP;
  • Consolidated agency Manual of Operations and Quality Manual;
  • Prepared/consolidated the agency's COB 2015 and APB 2016;
  • Evaluated/endorsed project proposals of various departments/units of the agency;
  • Submitted quarterly reports and to DA, NEDA-RDC I, GCG, PMS, DOF, Congress and other oversight agencies; and,
  • Maintained information systems/databases on tobacco production, farmers, area, and other pertinent information for uploading in the agency website.
Prepared by: NTA Corporate Planning Department