Philippine rubber exporters seek off-peak power rates

ERJ staff report (TP)

Mindanao, The Philippines − Rubber exporters are asking the government for off-peak power rates, not only to make them more competitive in the 2015 Association of Southeast Asian Nations (ASEAN) economic integration but also to make power distribution more efficient, reported Business World Online.

This was raised by Bonifacio T. Tan, CEO of Farma Rubber Industries, during a "Doing Business in the Free Trade Area" campaign event in Davao City (Mindanao) last week.

Farma is a manufacturer and exporter of Standard Philippine Rubber (SPR 20 and SPR 10). Among its export markets are Indonesia, Malaysia and some parts of Eastern Europe.

"We in the rubber manufacturing industry are faced with production problems because of the high electricity rate in Mindanao … compared with Malaysia, which imposes almost half our power rate," Tan said.

A 20 percent discount for off-peak rates starting at 7:00 pm. will make the rubber-exporting companies more competitive even with the incoming ASEAN integration, he said.

Tan said he and other rubber producers have requested the Cotabato Electric Cooperative (Cotelco) to provide the industry with off-peak electric rates, just like the perks being enjoyed by their Malaysian competitors.

Malaysia’s power provider implements the off-peak tariff rider scheme, which provides 20 percent discounts to specific industrial consumers between 10:00 pm and 8:00 am. With this, rubber processors would be encouraged to reschedule their production operations during the off-peak hours to enjoy the discount and thus lessen the load of the power providers during peak hours.

The cooperatives would be able to tell if the companies are using power during off-peak hours with a monitoring gadget attached to the electric meter.

However, Cotelco said that this will be difficult to implement this since they also need the approval of the Energy Regulatory Commission.

Rubber from the tree is 50 percent water, so it is milled, washed and oven-dried, leaving 100 percent dry rubber content (crumb rubber). As a result, the exported rubber has more value than if it is exported in raw form.

However, rubber processors in Mindanao are forced to export raw rubber because of the expensive electric rates. Electricity accounts for almost 50 percent of the cost of production in rubber processing, followed by diesel used to further dry raw rubber (25 percent) and labour (10-15 percent).

Tan said operating during off-peak hours will not really give processors much headway since they also have to consider the night differentials for labour. However, he added, this will help reduce power consumption during peak times, which would be advantageous to the power sector.

Data from the Bureau of Agricultural Statistics shows a total of 176,244 hectares of land planted with rubber all over the Philippines, as of 2012.

The majority of the country’s rubber production comes from Mindanao, with 55,000 hectares in North Cotabato.

Tan noted that the free trade agreements do not have much effect on rubber because the total output is being exported, so the ASEAN integration would not have many adverse effects on the industry.

There is very little demand for rubber in the local market because according to Business World Online the only remaining tire manufacturer in the Philippines is Yokohama, so 85-90 percent of the country’s raw and processed rubber is exported to other countries.

However, Tan said, providing rubber processors with the much-needed off-peak discount would make them more competitive since at present, they are forced to export raw rubber to their competitors in Malaysia, who process the rubber themselves since they have lesser manufacturing cost. This would leave the country a mere supplier of raw material instead of an exporter of value-added rubber.

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Full story from Business World Online