Pledging scheme ‘aids rich’

Year2013-08-05

Patsara Jikkham and Soonruth Bunyamanee

SPECIAL REPORT:Not all rice farmers need state help, so pundits question if we need the government plan, write

While the debate surrounding the problematic rice-pledging scheme continues to swirl and grow increasingly political,the issue at heart remains in questionĀ  i s the scheme really necessary?

The agricultural sector contributes only about 8.6% to Thailand’s gross domestic product (GDP), but it employs 38.2% of the population (about 25 million people). Of them, about 4.8 million households (18 million people) are rice farmers.

As the economy has moved increasingly from agriculture to industrial and services sectors, are conventional rice price subsidies still necessary?

This question doesn’t even consider that the subsidy is potentially generating huge budget losses and is allegedly plagued with corruption.

Thailand’s rice subsidy has been in place for decades and is aimed at boosting the incomes of rice farmers, who were once were called the country’s “backbone”.

The pledging initiative was introduced by the Bank for Agriculture and Agricultural Cooperatives when the rice price fell drastically in 1970.

The scheme was aimed to help farmers generate cashflow so they could have money to repay debts to the bank.

It has continued since then, with some different conditions and objectives, under each successive government.

For example, during Prem Tinsulanonda’s administration for much of the 1980s, the government set the pledging price at not over 80% of market price,which was intended as a cushion for the falling rice price. It also required farmers to withdraw their pledged rice when the market price shored up.

Under the scheme of the current Yingluck Shinawatra government, farmers can pledge outright to the scheme at 15,000 baht per tonne,which is about 40% over the market price.Ammar Siamwalla, honorary economist at the Thailand Development Research Institute (TDRI) who is an expert in Thai rice, said he does not think rice price subsidies are necessary or an effective way to assist the poor.

He pointed out that not all rice farmers need state financial assistance.

Mr Ammar said about 20% of the richest rice farmers produce 42% of the total rice supply in the market.

Meanwhile, according to a TDRI study,2.59 million of the poorest rice farming households do not produce enough rice to join the scheme.

As a result, Mr Ammar said any rice price subsidy which does not take into account farmers’ income levels would only benefit those who are already well off, including rice millers and exporters, while those who are actually in need of a subsidy get nothing.

“Looking at all rice farmers as if they are among the poorest group of people, as they were in the past, is too romantic a perception these days,” he said.

“Rice farming in Thailand has changed a lot,” he said, adding that many rice farmers also grow other crops.

In rain-fed areas, they can grow rice for only six months a year, so they grow other crops or pursue other types of work outside of the rice-growing season,he said.

Some will go to Bangkok or other urban areas to work, and many children of rice farmers are highly educated and have good jobs.

Some rice farmers even live in Bangkok and employ other people to tend to their fields.

“The view that this is a poverty-hit career needing subsidies is a distorted one,” Mr Ammar said.

“Humanitarian assistance to the poor is imperative but this has nothing to do with product price subsidies.”

The argument that subsidies are needed because farmers are often exploited by middlemen is also flawed,Mr Ammar said.

He said research showed the margins earned by middle traders are not much higher than their operating costs.

Inevitably, though, the rice farmers themselves say subsidies are necessary.

Thai Agriculturist Association president Wichien Phuanglamjiak said rice farmers still need subsidies via the pledging scheme because they are hit hard by the high cost of production, labour,fertilisers and fuel.

The option of reducing the pledging price from 15,000 baht a tonne to 12,000 baht is unacceptable, Mr Wichien said.

He said in the rainy season, most rice supplies would be sold at 30% humidity,which would bring the price down to 9,000 baht per tonne.

Mr Wichien conceded that the average cost of rice farming is between 5,000 and 6,000 baht per tonne, but he said a margin of around 3,000 baht could not cover interest payments, labour costs,land rental payments and the rising cost of living.

But Thai Rice Farmer Association president Prasit Boonchuey disagreed.He said rice farmers could survive if they reduced production costs and sold rice at 20-25% humidity, for which they would earn 10,000-11,000 baht per tonne.

Nusin Chiawchan, a rice farmer in Mukdahan, insisted that the subsidy scheme is necessary.

“How can I survive if the rice price fell down without the subsidy scheme?”she asked. “Despite the pledging scheme,I earn an annual profit of 50,000-60,000 baht from only one crop a year.”

Outside of the single crop, she said she takes work elsewhere to make ends meet. “If the rice price is slashed any further, I am better off selling the rice field,” she said.

Her view was echoed by Yasothon farmer Somkiat Chaiyaruk.

With variable weather and soil conditions and rising fertiliser costs and goods prices, he said it was impossible to make a living solely from rice farming.

Despite the price subsidy, he said his profits and purchasing power had not substantially increased, because of rising production costs and cost of living.

When not farming his rice, Mr Somkiat works as a carpenter.

Suwit Ruthiwut, a farmer from Roi Et, said rice growers face great disadvantages. “Even though we are called the backbone of the country, rice farmers are not well-looked after,” he said.

“Whichever crop we grow, we have no right to set the price, no right to demand anything.

“The government tells us one price,but the middleman says another.

“We have to sell our produce at the prices we are given.”

Nathee Sripanmorn, a rice farmer from Bang Pahan district of Ayutthaya, said if there was no subsidy, the market price would have to be 8,000 baht per tonne at the very least if farmers were to survive.

“Farmers should be able to control their selling prices, not middlemen who always force farmers to sell below the proper rate,” he said.

But Thai Rice Millers Association president Manas Kitprasert said the rice farmers themselves are sometimes to blame for not getting the full pledging price.

He said they often harvest immature rice in their haste to sell, but these crops have high humidity levels, which bring the price down.

Mr Manas said they will then blame millers or buyers when they don’t get the price they want, rather than accept the problem lies with the quality of their own rice.

Source: Bangkok Post