The Thailand Development Research Institute suspects that the rice inventory held by government could be far less than the reported 17 million tonnes, as the system has given rise to illegal domestic sales so that certain parties could reap the benefit of a Bt5,000-per-tonne price differential.
The TDRI suggests that the government should limit the subsidy for rice farmers and refrain from price intervention, so as to avoid further fraud, corruption and illegal trading.
Contrary to the recent government announcement, based on a Public Warehouse Organisation (PWO) report, that the rice inventory held by the state was in the region of 17 million to 18 million tonnes, noted TDRI technocrat Niphon Puapongsakorn believes the actual stock level is only about 10 million tonnes, based on data compiled by the institute.
The government’s rice-pledging scheme has been in place for the past two years, covering four producing seasons involving the harvesting of 24.4 million tonnes of rice.
Coupled with the 2 million tonnes carried over from the previous government, the grand total is 26.4 million tonnes of rice.
Hence, Niphon argues, the PWO’s report that the rice inventory stood at 17 million tonnes means that as of year-end 2012, the government had been able to distribute as much as 9.4 million tonnes of rice without disclosing any of that amount to the public.
The government, on the other hand, has only mentioned the reimbursement of Bt120 billion to the Bank for Agriculture and Agriculture Cooperatives, of which Bt93 billion was from the sale of rice.
Based on this, the government sold Bt15,000-per-tonne pledged unmilled rice at only Bt10,000 per tonne, excluding other costs, he said. Questions arise, therefore, about the Bt5,000-per-tonne differential.
While data show sticky-rice exports of Bt1.06 million tonnes from January to September last year, in fact the rice-pledging scheme has no policy of using unmilled rice in place of sticky rice. Hence someone must have removed rice from the state’s mills, Niphon reasoned.
Another observation is that since Thais consume about 10 million tonnes a year, and most of the rice stocks are held by the government, the domestic price should be very high.
However, the current domestic price is still Bt21,000 per tonne, which equates to Bt21 per kilogram or Bt105-Bt110 for a 5kg pack of rice, he added.
Another interesting point, he said, was that while the government had tried to keep the retail price at about Bt21,000 per tonne, it had perhaps been able to sell rice at only Bt10,000 in the market to rice traders, who had then sold it on for about Bt15,000.
The Bt5,000 differential probably then went into the pocket of someone with the authority to order the removal of rice from the state’s mills for sale to traders, who likely distributed more than the computed figure of 9.4 million tonnes of rice.
In that scenario, the actual rice inventory in the state’s hands should not exceed 17 million tonnes.
That is, in his view, what happened and the reason that the government dare not announce the actual figure of what it has actually sold. According to Niphon, rice brokers are typically used to source required stocks, earning about Bt15 per kilogram for doing so.
Normally, when farmers pledge unmilled stocks with the state mills, the pledged stocks will be milled and sent for storage at state-run warehouses via a PWO representative.
However, under the fraudulent method, the rice broker, or a person with political clout, will negotiate to buy state stocks from officials and ask the affiliated rice mills to deliver the produce directly to the rice-trading firm, bypassing the traditional route of sending the rice to the state warehouse, he said.
Thereafter, the parties involved in the fraudulent scheme will fix the figures in line with the amount of rice pledged with the state mills and the PWO.
Illegal domestic sales of rice in this manner would fetch Bt5,000 per tonne, or a Bt5-per-kilo profit for the trader. The exact illegal-profit figures depend on the actual quantity of rice sold illegally in the domestic market, Niphon added.
He reiterated that the government should continue to assist rice farmers, but not in the way it currently does so.
Every satang should reach the farmers, hence the government should place a monetary limit on the rice-pledging scheme, direct its support to poor small farmers and refrain from price intervention, as it will give rise to further fraud and corruption and illegal trading, Niphon said.
First published in The Nation, 12 June 2013