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National Tobacco Administration (NTA)
Annual Report for CY 2014

Amidst formidable issues and challenges in the immediate past years which were foreseen to exert negative impact on the industry, (to include, aggressive global campaign against tobacco and smoking, increasing health consciousness, increasing domestic taxation of tobacco, e.g. R.A. 10351, and Increasing import liberalization and global competition) 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 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 tobacco industry for the ultimate benefit of its stakeholder, especially the tobacco farmers.

We note herewith that, the industry provides livelihood and sustenance to about 2.9 million of stakeholders, including the more that 800,000 tobacco farmers and their families; in 2013, it generated PHP67.96 B in excise taxes, which increased to more than PhP75 B in 2014, more than PhP80 B if we include other fees and duties, which help the government fund its education, health, welfare, infrastructure and economic programs over the country (68 B in 2013) under RA 10351; and earns and savesdollars for the country , average of US$ 281 M from 2011-2013.

Based on PSA-BAS data, tobacco remained as the second among the top ten commodities with highest production growth, 11.79%, from 2010-2013 (DA Annual Report, 2013).

 

&TOBACCO INDUSTRY’S PERFORMANCE FOR 2013 AND 2014

Number of tobacco farmers and tobacco farm area (in hectares) both increased by 3%, from 53,959 to 55,763 and 37,021 to 38,264, respectively;

Volume of production showed a decrease of 3.69%, at 65 million kilos. With the documentation of tobacco acceptances still on-going, as of date; Production however, is expected to reach to about 67 million kilos for the year.

Revenue from excise taxes increased by 111% from PhP32.17 billion to PhP67.96 billion; and by more than 100 % intotal revenue from PhP39.20 to PhP78.67 billion (for 2012 to 2013). Further increase was attained in 2014 which wasestimated to reach more than PhP75 billion;

Export of unmanufactured leaf tobacco decreased by 25% from 51.27million kilos to 38.46million kilos; with the corresponding 4% decrease in value, from US$162.55 Million to US$156.04 Million;

Local manufacturers, imported a total of 107.77 million kilos of unmanufactured leaf tobacco for 2014, from 116.72 million kilos in 2013, or a reduction of 7.67%.

PROGRAMS/PROJECTS/ACTIVITIES

The Agency’s programs and projects are anchored on the 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”.

It is also in line with the MFOs and targets in its Performance Scorecard with the GCG, wherein the following were accomplished in 2014:

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 calendar year 2014 (covering end of crop year 2013-2014 and beginning quarter of crop year 2014-2015), NTA assisted a total of 7,803 tobacco farmers, an increase of 263% from the targeted 2,963 in 2014. The total production assistance extended was PhP70.75 million out of the PhP80 million proposed. Likewise, NTA also facilitated the release of production assistance provided by Tobacco Buyer Firms, GFIs and LGUs to 10,853 tobacco farmers covering 6,689 hectares.

Volume and Value of Production/Acceptances

Total tobacco production/acceptances documented, to date, is at 65.168 million kilograms, valued at PhP4.631 billion, as against 67.665 million kilograms, valued at PhP4.664 billion, or a decrease of 4% and 0.71%, respectively, as shown in the table below:

 

  2012-2013 2013-2014
TobaccoType Volume (M Kgs)  Value (B PhP) Volume (M Kgs) Value (B PhP)
Virginia 40.158 2.711 32.752 2.259
Burley 15,028 1.208 19.431 1.615
Native 12.479 0.745 12.985 0.757
Total 67.665 4.664 65.168 4.631
Data source: NTA Regulation Dept. as of Dec. 2014

Yield per Hectare

Yield obtained under TCGS was quite high comparing with CY 2012-13. Average for Virginia was 2,126 kgs/ha, burley at 2,534 kgs/ha and native at 2,864 kgs/ha. Across all tobacco types, yield was at 2,508 kgs/ha.

Net Income per Hectare

For tobacco season 2013-14, average net income across all types of tobacco increased by 14%, from PhP55,672 in 2012-13 to PhP63,281 per hectare. The increase came from Native tobacco farmers net income,which increased by 106%. A detailed presentation of the datais shown below:

 

TYPE/SUBTYPE
2012-13
2013-14
AVE. GROSS SALES/HA
AVE. COST OF PROD/HA
NET INCOME
AVE. GROSS SALES/HA
AVE. COST OF PROD/HA
NET INCOME

VIRGINIA

           
NEUTRAL 145,470.28 105,798.12 39,672.16 128,340.30 108,720.30 19,620.00
IMPROVED FLAVOR 191,092.63 112,452.89 78,639.74 176,444.35 118,210.63 57,233.72
FULL FLAVOR            
AVERAGE 168,281.46 109,125.51 59,155.95 152,392.33 113,465.47 38,926.86
BURLEY            
NEUTRAL 144,612.55 90,731.28 53,881.27 158,342.25 95,070.40 63,271.85
IMPROVED FLAVOR 193,808.82 121,878.65 71,930.17 176,276.55 123,099.00 53,177.55
AVERAGE 169,210.69 106,304.97 62,905.72 167,309.40 109,084.70 58,224.70
NATIVE            
BATEK 121,898.69 67,331.16 54,567.53 234,241.10 91,652.67 142,588.83
CIGAR FILLER 110,654.65 75,315.08 35,339.57 133,740.25 90,947.82 42,792.43
AVERAGE 116,276.67 71,323.12 44,953.55 183,990.68 91,300.05 92,690.63

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 5tons/hectare. Under the program, average yield obtained for the year was 4,968 kgs/ha while net income was at PhP42,570/ha.

For CY 2014, NTA provided production assistance to 1,959 tobacco farmers, covering 1,607hectares. Production Assistance totaled PhP20.66 million, 3% more than the targeted production assistance for the year of PhP20 million.

c. Agripinoy Tobacco Farmers’ Food Processing and Trading Center

The IFOIGAP includes value-adding/processing, where in 2012, NTA started the establishment of Agripinoy Tobacco Farmers Food Processing and Trading Center. The project will provide production assistance to tobacco farmers in the production of raw materials- hogs and poultry, which the Plant will buy and process into bagnet, Vigan longaniza, tapa, bacon, etc. and sell to Bagsakan Centers, govt. offices and hospitals in Region 1 and Metro Manila. The Agripinoy milling complex will include a feedmillto cater to the requirement primarily of the farmer-beneficiaries of hog fattening and broiler production; and, a ricemill to cater to the needs of the farmers.

With regard to its Hog Fattening Project component, total assistance of PhP52.969 million were extended to 592 farmer-cooperators.As a contribution to the food sufficiency goal of the DA, a total of 514,503 metric tons (mt) hogs were produced, 12,037 mt of chicken were harvested and the plant was able to process 276 mt of fresh meat, 58 mt of processed meat and 10 mt of dressed chicken.

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

The project, now on its second year, was granted an PhP83 million budget from the NTA’s entitlement of the Tobacco Fund (RA 4155), aims to address the fuelwood and other forest resources requirement 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. It will be implemented from 2013 to 2016.

For the Tree Seedling Production and Distribution component, a total of 1,330,192 seedlings were produced against the target of 1,220,000. A total of 1,237,704 were planted in various areas in Region 1, 2 and CAR under its Synchronized Tree Planting.

For the KahuyangPangkabuhayan at Pangkalikasan or grow-out plantation module, a total area of 1,497 hectares out of the 1,600 targetedfor year. For bamboo, 413 hectares were planted out of the 400 hectares proposed for the year were planted with 3.74 million trees (giant ipil-ipil and gemelina). A total of PhP52.97 million was released for production assistance to tobacco farmer cooperators of the project pending submission of documentary requirements for release of funding based on pre-approved workplan and release schedules.

Collection Efficiency

For theTobacco Contract Growing System, 85% out of the targeted 86% was collected for the cropping season of 2013-14.

For the Rice Production project, 93%, out of the 97% targeted collection was attained. This represents only the first cropping total of PhP19.36 million since the additional of PhP1.3 million for the second cropping was granted only in October 2014.

MFO 2 – Research and Development Services

Under the Industrial Research Department, studies were conducted to find alternative uses of tobacco, one of which was the Tobacco Extracts for Controlling Pests. An organic pesticide, the production and utilization in vegetable crops in farmers fields was tested. Several parameters were considered such as efficacy, quality, ease of handling, and general acceptance. These research trial was a prerequisite for the product’s registration and commercialization with the FPA.

Two studies were also conducted for standards and quality assurance: 1) Annual Physical and Chemical Evaluation of Philippine Grown and Imported Tobacco Leafand 2) Annual Physical and Chemical Evaluation of Manufactured Tobacco Products (Cigarettes). In the first study, chloride content of Philippine grown (neutral and improved/topped) and imported burley tobacco were determined; while for the second study, weight, circumference and roundness of local and imported cigarettes were identified. These studies are being conducted to determine the presence and levels of hazardous chemicals/carcinogenic substances in tobacco and tobacco products, as part of NTA’s regulatory function.

For the studies incorporated in the technology manual, the results of the “Effect of late topping and irrigation on the yieldand quality of Virginia tobacco” was included particularly onadditional irrigation after 3rd and 5th priming with topping for improvement of yield and quality of top leaves of flue-cured tobacco. The protocol research on “Bioefficacy evaluation of Orthene against the tobacco insect pests and their natural enemies” was also incorporated in the technology manual since the product was found to be is as effective as the currently recommended product with similar active ingredient and was recommended as alternative choice for the control of ants, sucking insects and black cutworm. It was included in the POT as one of the products the farmers can choose from.

MFO 3: Regulatory Services

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

A combined total of 441 TCs, importers/exporters, manufacturers out of the 309 proposed were licensed and 90% of applications were approved within the day;

On Monitoring, 88%out of the 38% entities targeted were subjected to random inspection, while 100%licenses/clearances issued were found compliant to regulatory conditions/rules;

On Enforcement, there was an increase of 98% on the 24% projected export/import commodity clearances issued for the year; and

On increase in income from regulatory functions, a total of PhP96 million was realized against the targeted PhP110 million or an 87% accomplishment.

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 FY 2014, NTA distributed 69.4 kilograms of tobacco seeds of different varieties benefitting 9,259 farmers or 4,629 hectares (at 15 grams per hectare); a total of 19 kg were sold to the private sector for distribution to about 4,800 farmers.

Farmers Organizational Development

From being traditional recipients of government’s assistance, this program aims towards nurturing the tobacco farmers to become truly self-reliant, self-sufficient and food secured. Through the formation of honest–to-goodness tobacco-based cooperatives, the tobacco farmers will be given the opportunity to develop technical, leadership, entrepreneurial and management capabilities alongside, financial capability development. The activities conducted for 2014 include:

  • Education and training/workshops for FOD Coordinators and Coops Officer and Members on the following topics: Cooperative Standards, Entrepreneurial and Business Management, Strategic Planning and Accounting for Non-Accountants;
  • 13 Livelihood Trainings to 1,248 Tobacco Farmers and Dependents.

Quality Assurance/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

Development and Commercialization of Other Uses of Tobacco

In response to the anti-smoking campaigns, enhancing global competitiveness, addressing public health consciousness and effective regulation, the continuing development and commercialization of the other industrial uses of tobacco to increase its utility. Among the other industrial uses/ products are tobacco pulp and paper from tobacco stalks, tobacco dusts as molluscicide cum fertilizer for aquaculture application; tobacco extracts as pesticide for fruit trees, vegetables and ornamentals, ethanol, veterinary products.

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 extendedfinancial assistance to the newbatch of 438scholars, 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 “OrasniMannalon ti Tabako” radio programs for a more active information dissemination and consultation, and reach out to far-flung areas of the regions; and,
  • Distributed 14,800 technoguides/technocalendarsto tobacco farmers; published a quarterly “Tobacco News” and regularly hold press conferences with the media.

Planning and Information Technology Management Services

  • Prepared COB 2014 and APB 2015;
  • Conducted consultations with Representatives of Congressional Districts, tobacco farmers and LGU beneficiaries, on R.A. 10351 highlighting, among others, certain provisions, such as duties and responsibilities of LGUs under the law, DA/NTA roles, proposed programs and projects for tobacco farmers.
  • Prepared first draft of Tobacco Industry Road Map and submitted to DA and DBM containing among others, the list of proposed programs/projects under R.A. 7171 and 8240, as recommended by LGU-beneficiary provinces/municipalities, an output of the consultations;
  • Submitted fourth draft of the proposed IRR incorporating amendatory provision to ensure that at least 30% of the LGU share or entitlement pursuant to R.A. 7171 and 8240, will directly benefit the tobacco farmers;
  • Updated and submitted to the DA registry of tobacco farmers and uploaded in the agency’s website (nta.da.gov.ph);
  • Evaluated project proposals of various departments/units of the agency;
  • Submitted quarterlyreports and to DA, NEDA-RDC I, GCG, PMS, DOF, Congress and other oversight agencies; and, h. 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