June 22, 2007

JOINT DAR-LBP MEMORANDUM CIRCULAR NO. 06-07

 

I. PREFATORY STATEMENT

Item II.B.2 of DAR Administrative Order (AO) No. 5, Series of 1998 states that:

"B.2 The landowner shall submit a statement of net income derived from the land subject of acquisition. This shall include, among others:

• total production and cost of operations on a per crop basis;

• selling price/s (farm gate); and

• such other data as may be required.

These data shall be validated/verified by the Department of Agrarian Reform and Land Bank of the Philippines field personnel. The actual tenants/farmworkers of the subject property will be the primary source of information for purposes of verification or, if not available, the tenants/farmworkers of adjoining property.

In case of failure by the landowner to submit the statement within fifteen (15) days from the date of receipt of letter-request as certified by the Municipal Agrarian Reform Office (MARO) or the data stated therein cannot be verified/validated. DAR and LBP may adopt any applicable industry data or, in the absence thereof, conduct an industry study on the specific crop which will be used in determining the production, cost and net income of the subject landholding."(Emphasis supplied)

Since there is no specific government agency overseeing the banana industry, no industry study can be validly undertaken, hence, these guidelines provide only for the procedures in the determination of applicable inputs to be adopted in the valuation of landholdings planted to cavendish banana such as annual gross production, selling price and cost of operations. EHScCA

II. COVERAGE

These guidelines shall cover lands planted to cavendish banana where:

A. Landowner submitted BIR-filed audited financial statements which could be verified and validated;

B. Landowner submitted BIR-filed audited financial statements but could not be verified and validated; and

C. Landowner did not submit BIR-filed audited financial statements.

III. VALUATION GUIDELINES

A. LANDOWNER SUBMITTED BIR-FILED AUDITED FINANCIAL STATEMENTS WHICH COULD BE VERIFIED AND VALIDATED

 The Capitalized Net Income (CNI) of the landholding shall be determined using the formula:

	(AGP x SP) - CO
CNI =	————————
	0.12
Where:
AGP	=	Annual Gross Production, in boxes per hectare
SP	=	Selling Price, in pesos per box
CO	=	Cost of Operation, in pesos per hectare

1. Annual Gross Production

Refers to the LO's 12-months production per hectare immediately preceding the date of Field Investigation (FI) which could be derived from the audited financial statements and shall be verified against:

• industry production data for the applicable period;

• interviews with farmworkers;

• LO's accounting records (subsidiary ledgers, daily production reports, sales/delivery receipts, billings, etc.); and

• farm management practices, topography and soil characteristic of the landholding

2. Selling Price

Refers to 12-months average selling price prior to the date of Claim Folder (CF) receipt by LBP from DAR which could be derived from the audited financial statements and shall be verified against:

• industry average selling prices; and

• LO's sales records (sales invoices, billing reports, etc.)

3. Cost of Operations

Refers to the total cost of operation during the 12-months period prior to the date of FI.

a. Shall include direct and indirect costs that are related to production and marketing of cavendish banana, depending on the point of sale.

  A list of applicable cost of operation is shown in Annex A.

b. Shall be verified and validated against:

• LO's accounting records (i.e., subsidiary ledgers, official receipts, purchase/delivery receipts, billings, etc.); and

• industry's generally accepted cost of operations per hectare.

B. LANDOWNER SUBMITTED BIR-FILED FINANCIAL STATEMENTS BUT COULD NOT BE VERIFIED AND VALIDATED OR LANDOWNER DID NOT SUBMIT BIR-FILED AUDITED FINANCIAL STATEMENTS ATcaEH

The Capitalized Net Income (CNI) of the landholding shall be determined using the formula:

		(AGP x SP) - CO
CNI =		————————
		0.12
Where:
AGP	=	Annual Gross Production, in boxes per hectare
SP	=	Selling Price, in pesos per box
CO	=	Cost of Operation, in pesos per hectare

1. Annual Gross Production

Refers to the 12-months production per hectare of the particular landholding immediately preceding the date of FI which shall be determined using the formula:

AGP	=	DPH x TR x BSR
Where
AGP	=	Annual Gross Production per hectare
DPH	=	Density per hectare
TR	=	Turnover Ratio
BSR	=	Box-Stem Ratio

a. The DPH shall be determined based on actual measurement of plant and row distances and shall be computed using the formula:

		10,000 sq.m.
DPH	=	————————
		RD x PD
Where:
RD	=	Row Distance, in meters
PD	=	Plant Distance, in meters
10,000	=	Equivalent of one hectare area in
		square meters

b. The TR and BSR shall also be determined based on actual field investigation of the particular landholding and may be validated with the farmworkers thereat.

c. The AGP shall be based on fruit classes (Class A, Class B, etc.) actually sold to the buyer/contractor.

2. Selling Price

Refers to the average of the latest available 12-months' selling prices prior to the date of receipt of the CF by LBP from DAR.

a. The applicable SP shall be determined based on the existing contract of the landowner with the contractor/buyer.

In cases where the copy of the contract is not available, the applicable SP shall be determined and validated against the contract of adjacent/adjoining landholdings under the same contractor/buyer. DCISAE

If the contract of adjacent/adjoining landholdings under the same contractor/buyer is also not available, the prevailing selling price in the barangay or municipality where the property is situated shall be used provided that the variety/quality of banana is comparable with that of the subject landholding.

b. The SP shall be measured at the point of sale (ex-patio, ex-packing house or ex-wharf) as stipulated in the contract.

3. Cost of Operations

a. The actual CO per hectare shall be determined using the generally accepted cost of operation per hectare for small and large plantation shown in Annex B as guide.

Small banana plantations are those plantations with less than 20 hectares while large banana plantations are those plantations with area of 20 hectares and above.

b. If there is/are farming activity/ies found not being undertaken in the particular landholding, exclude such item/s from the list of cost items in Annex B-1 in coming up with the actual CO per hectare.

On the other hand, if the LO undertakes other farming activities not included in the generally accepted cost of operation in Annex B-1, include/consider the same in coming up with the actual CO per hectare.

Provided, however, that the inclusion or exclusion of the said farming activities is duly supported with the necessary documentary evidences and justifications.

c. If the actual CO per hectare of the particular landholding established at the time of FI is higher than the generally accepted CO per hectare in Annex B, adopt the actual CO per hectare in the determination of the property's CNI.

If the actual CO per hectare of the particular landholding established at the time of FI is lower than the generally accepted CO per hectare in Annex B, adopt the actual CO per hectare in the determination of the property's CNI provided that the same could be supported with documentary evidences and justifications. Else, adopt the generally accepted CO per hectare in Annex B in the determination of the property's CNI.

d. All applicable direct and indirect costs identified by the AOC shall be presented in the Field Investigation Report (FIR) duly supported with the necessary documentary evidences and justifications. acITSD

IV. TRANSITORY PROVISION

These guidelines shall apply to lands planted to cavendish banana whose valuation is in process and not yet covered by Memorandum of Valuation (MOV) and whose valuation is rejected by the landowner. In the case of the latter, the use of these guidelines shall only be applied when so ordered by the Court.

No petition or requests for revaluation on the basis of these guidelines shall be entertained in cases where the LO has already accepted the DAR/LBP valuation, whether the LO has already been paid or not.

V. REPEALING CLAUSE AND EFFECTIVITY

All orders, circulars, rules and regulations inconsistent herewith are hereby revoked, amended or modified as the case may be.

This Joint Memorandum Circular shall take effect ten (10) days after its publication in two (2) national newspapers of general circulation pursuant to Section 49 of RA 6657.

Quezon City, June 22, 2007.

(SGD.) NASSER C. PANGANDAMANOIC-Secretary

(SGD.) GILDA E. PICOPresident and CEOLand Bank of the Philippines

 

Published in The Philippine Star on July 2, 2007.