(Last of two parts)

CANDON, Ilocos Sur—From 1996 to 2008, the provincial government here received some P5.816 billion from the national government’s tobacco excise tax collection. But the likes of Cesar Despe, a third-generation tobacco farmer, just shrug their shoulder when asked how the tobacco fund has helped them.

“There’s no effect. Nothing has changed,” Despe says.

He remembers former Governor Luis “Chavit” Singson making a promise during a campaign that he would allocate from that fund P1 million for every municipality. If Singson made good his promise, the 32-year-old farmer doesn’t know.

In fact, farmers like him “don’t really care anymore,” says a former farmer, who is now into selling of fertilizers. “Ever since, we have not benefited from the tobacco excise tax.”

Ilocos Sur got P2.19 billion from the tobacco excise tax from 2003 to 2006. That P2.19 billion in four years makes up more than a third of the almost P6 billion that the province got in a 13-year period. (Click here for the Tobacco Excise Tax Share of Ilocos Sur, from 1996 to 2008)

More Poor Families

Republic Act 7171, or “An Act to Promote the Development of the Farmers in the Virginia Tobacco-Producing Provinces,” mandates that the provinces of Ilocos Sur, La Union, Ilocos Norte, and Abra get 15 percent of the taxes on Virginia type A cigarettes collected by the national government. Ilocos Sur gets half of the 15 percent because it’s producing most of the Virginia tobacco.

From 2003 to 2006, too, Ilocos Sur registered the highest increase in poverty incidence (from 22.8 to 27.2 percent) among the provinces that receive subsidies under RA 7171, based on data from the National Statistics Coordination Board.

The number of poor families in Ilocos Sur grew from 28,032 to 35,779, and the poverty threshold—the minimum amount that a family of five would need to satisfy their basic and nutritional requirements—increased from P5, 343 to P7,051.

Apparently, the fund that was established by law specifically to improve the economic condition of tobacco farmers has yet to make an impact on its intended beneficiaries.

It’s not of any comfort that government auditors found the provincial government misusing at least P1.3 billion in tobacco fund for a period of seven years until 2005, including the P190 million cash advance that former Gov. Luis “Chavit” Singson wasn’t able to liquidate. (Click here to read part 1 of this report, “P1 billion in tobacco funds misused”)

A Way of Life

Ilocos Sur Governor Deogracias Victor Savellano told Newsbreak that poverty incidence generally increased nationwide because of the economy. He refused to comment on how the funds were used by his predecessor and mentor, Singson.

According to data from the National Tobacco Administration, as cited by doctors Lenora Fernandez and Deanne Quilala of the Philippine General Hospital (PGH), “1.5 million Ilocanos depend of the tobacco industry,” and they include 40,000 farmers.

There are no exact numbers on whom are from Ilocos Sur, but local data are instructive. Ilocos Sur produces 95.61 percent of the country’s Virginia tobacco, the two PGH doctors said in their study of smoking among the youth in Ilocos Sur. Nine of out 10 farmers in Ilocos Sur are into tobacco farming. Twenty-eight of the 34 municipalities in the province are producing tobacco.

To many in the province, Newsbreak gathered, tobacco farming has been a way of life, a source of livelihood, and a family legacy to many generations. “My grandfather and my father were all tobacco farmers. That’s why I’m a farmer,” Despe said.

He’s also in heavy debt, like most tobacco farmers.

Contract Growing

For this planting season, Despe has incurred P30,000 in loans from private individuals and lending institutions.

Like him, many tobacco farmers here are into “contract growing.” It’s an arrangement where manufacturers and tobacco buyers advance the money that the farmers need to buy fertilizers, seedlings, and farm implements.

In return, farmers can sell their produce only to the lenders, and thus lose their bargaining power. It has become a vicious cycle.

On the average, a one-hectare plantation yields P100,000 worth of tobacco leaves. A kilo of tobacco leaves fetches between P60 and P70. The “contract growing” arrangement, however, forces the farmers to sell their produce to the lender-manufactures at a lower price of P50 a kilo.

“We have no freedom where to sell our produce,” a farmer laments.

Less Income

Although high-yielding in terms of income, production and labor expenses in tobacco farming are expensive. Despe says expenses (or loans) amount to P30,000, thus giving him between P60,000 and P70,000 in earnings. His net income is much lower, after loan interests and emergency farm expenses are deducted.

In some cases, farmers only earn between P30,000 and P40,000 because of infestation and bad weather. Despe says there are unexpected losses, too. For instance, his barn for drying tobacco leaves was blown off when a typhoon hit the province. He had to raise P10,000 to construct a new barn.

The province’s share in the tobacco excise tax collection was supposed to ease the burden of farmers. However, based on Commission on Audit (COA) reports, the local governments in Ilocos Sur are not exactly using the money to finance the types of projects specified in RA 7171.

If things went according to the law that created the fund, Ilocos Sur, by now, would have tobacco farmers earning more through co-op projects, practicing alternative farming systems, co-managing or even owning agro-industrial projects, and getting their produce to the market fast through an efficient road system.

Of the province’s tobacco excise tax share, 40 percent goes to the provincial government, 30 percent to the municipal governments, and 30 percent to the congressional districts.

Admonished by COA

The audits on the use of excise tax in Ilocos Sur that the COA has conducted are replete with admonition over inappropriate charges against the fund. “Only disbursements that directly benefit the farmers of the province should be charged against the RA 7171 fund,” the COA stressed.

For instance, a COA report in 2005 found out that a total of P85.6 5 million from the tobacco excise tax share of the provincial government was used to purchase fishing boats and repair classrooms, projects that did not directly affect the farmers. The provincial administrator explained that the fishing boats was meant to give tobacco farmers an alternative source of income, and that the new classrooms would benefit the farmers’ children.

In Candon, local officials were found to have allocated P5 million of the tobacco fund for the construction of a new city hall. “How the new city hall would serve the farmers’ interest is anybody’s guess,” a resident says.

Farmers here have silently questioned the useless projects and lamented that the funds could have been used for more practical projects, like fertilizer subsidies and price support.

Examples by Other Provinces

In La Union, for example, former Governor Victor Ortega used the province’s tobacco fund to subsidize the price of fertilizers and provided seedlings of high value crops “to encourage [farmers] to diversify,” he told Newsbreak.

As a congressman now, he is using his tobacco fund share in putting up solar dryers and purchasing farm implement.

In Ilocos Norte, another RA 7171 beneficiary, has used most of its tobacco fund to construct farm-to-market roads and rehabilitate agricultural facilities. Fifty-five of the 76 projects funded by the tobacco excise tax were deemed by COA to directly affect the farmers.

Among its projects in 2006, for instance, was the construction of the P1.6-million worth communal irrigation system, and the acquisition of tobacco barns and purchase of fertilizers and supplies at P5.5 million.

A tobacco farmer in Ilocos Sur says he once sought financial assistance from the provincial government, but was told that the funds from RA 7171 cannot be loaned out. This left him at the mercy of capitalists, or even loan sharks.

Ironically, the provincial government had given “financial assistance” totaling P15 million to dubious NGOs from the tobacco fund, a COA report said.

Farmers Excluded

Perhaps one loophole in RA 7171 is that it doesn’t give farmers, the intended beneficiaries, any role in managing the tobacco fund. It’s left in the hands of local government officials, whose project ideas may not necessarily benefit the farmers.

“We should be part of it, in the consultation and in the implementation of the excise tax [projects],” says a farmer in Santa town. “We are the beneficiaries and yet we have no voice in [managing] it.”

Savellano admits that “contract growing” has made the prices of tobacco leaves susceptible to manipulation. He says that the tripartite body—composed of representatives of the National Tobacco Authority, the farmers, and the manufacturers—set at an “outrageously low” P50 to P60 per kilo the selling price of tobacco leaves.

The governor notes that, in other countries, a kilo of tobacco leaves is priced at P100 at the minimum. He says he intervened with the tripartite body, and “I was able to convince them to raise the price to P65 to P70 a kilo.”

It is a small consolation, but the tobacco farmers of Ilocos Sur clearly need much more than that. (Newsbreak)