Business groups and a former agriculture chief welcomed the rice price ceilings that will take effect on Tuesday, but they are worried it could encourage rice smuggling and may result in a supply shortage.

"The price cap is understandable as the global supply is tight and rice prices have risen," Philippine Chamber of Commerce and Industry president George Barcelon told DAILY TRIBUNE in a phone interview on Saturday.

Barcelon, however, cautioned more smugglers might avoid regulations as import taxes are higher than the government-ordered price caps: P41 per kilo for regular milled rice and P45 per kilo for well-milled rice.

Rice prices in the country surged by at least 10 percent to P62 per kilo after India banned exports of its non-Basmati white rice, triggering price hikes in the world's other top rice exporters Vietnam and Thailand.

AP Securities said both countries supply 90 percent of Philippine rice imports.

The Rice Tariffication Law imposes a 35 percent rate on imports from Southeast Asian nations but removes the quota on import volumes.

The law's author Sen. Cynthia Villar said proceeds from the tariffs are invested in the acquisition of farm equipment and skills development among local farmers to boost their production.

With the higher tariff rate and rice price ceilings, Barcelon said more legitimate rice importers might opt not to sell to the Philippines, causing a shortage of the commodity in the country.

Supply shortages feared

While the price cap on rice will help cease arbitrage and undue padding of margins, Albay Rep. Joey Salceda underlined the adverse effects of the price ceiling, like supply shortages.