Billions going to people who aren’t farmers, Pridiyathorn tells seminar; says direct payment is the way to go
Three leading rice experts have got together to try to convince the government to scrap the rice-pledging scheme- or replace it with a direct-pay scheme.
Former deputy prime minister and central bank chief MR Pridiyathorn Devakula has joined hands with Ammar Siamwalla, one of the country’s top researchers, and scholar Nipon Puapongsakorn, who is with the Thailand Development Research Institute (TDRI), to try to change the highly controversial policy.
Pridiyathorn and Nipon joined a seminar yesterday on the rice scheme hosted by the Puey Ungpakorn Institute.
He said many farmers got no benefit from the scheme even though it racked up at least Bt425 billion in losses over the past two seasons.
“The government should not proceed with the third year of pledging, but shift to directly paying farmers equally, as it has already done recently to solve the falling price of rubber,” he said.
The government spent Bt678 billion for rice pledging in the two harvest seasons.
Pridiyathorn also unveiled an open letter to Prime MinisterYingluckShinawatra. A study by Pridiyathorn and the TDRI, based on data from the Finance Ministry’s Post Audit Committee, showed that farmers gained only Bt210.12 billion but other people who should not have benefited gained Bt115.8 billion from the two-year project.
Although the pledging scheme could help farmers, there were other ways to help farmers and avoid huge losses or payments to other people, he said. Unlike the price guarantee, a direct payment to farmers would ensure that every farmer gets equal payment.
If the prime minister allowed the third year of pledging to go ahead, it would clearly show she has led the country to financial disaster, Pridiyathorn said.
Cumulative losses for several years would damage the country’s development and financial status. The government could help farmers by choosing other methods it has already created by directly paying money to farmers as compensation for low rice prices, while allowing traders to do their job in promoting rice trading, he said.
A police report showed that more than a million tonnes of rice had disappeared from government stocks, meaning the government has faced unexpected losses, Pridiyathorn said. And the Post Audit Committee found that Thailand already faced losses of Bt130 billion for the first year of pledging (2011-12 season).
TDRI researcher emeritus Ammar Siamwala called on the government to be responsible for negative affects of the scheme.
The global glut in rice was growing because of the huge stockpile in Thailand, making it difficult to sell, he said.
“The government is creating a huge loss and having problems obtaining loans to further fund the scheme. The world’s demand for consumption of high-quality rice is on the rise, while Thailand, influenced by the scheme, is producing low-quality rice, which would become a long-term problem,” he said.
The US Department of Agriculture estimates that reserves in Thailand will increase 24 per cent to 15.5 million metric tonnes this and next year as global output rises 1.7 per cent to an all-time high of 476.8 million tonnes.
The price of 5-per-cent broken Thai white rice, an Asian benchmark, will drop 12 per cent to US$390 a tonne by April, a five-year low, according to the median of eight trader and analyst estimates compiled by Bloomberg.
Nipon Puapongsakorn, a TDRI scholar, said while the pledging scheme was not totally without advantages, it had created huge losses and stopped Thailand being the world’s largest rice exporter.
The pledging scheme could help more than a million farmers and keep retail rice prices low, but the country now faced more than Bt400 billion in losses, he said.
Thailand’s rice-trading system was now called “capitalism for government cronies”, because only firms with good connections with the government benefit from the pledging scheme, as they can buy rice at a low price, he said.
The government should change its pledging policy and directly pay farmers assistance money, he said.
The government must stockpile huge quantities of rice that will continue to deteriorate in quality. It would get less from the scheme, but needs to spend more to stock the rice and faces higher interest rates for its loans to pay for the pledging scheme, he said.
Vichai Sriprasert, honorary president of the Thai Rice Exporters Association, said the government had chosen the wrong method by setting the pledging price too high, and had not shown concern for rice traders, especially general exporters.
Instead of spending a huge amount for the rice subsidy, it should finance long-term development projects such as irrigation systems, logistics, seed quality and research.
“The pledging is giving only small benefits to some people or companies who have close connections to the government,” he said, urging the government to allow exporters to be involved in stockpile releases. This government used to sell rice at a very low price of Bt5.70 per kilogram to some exporters, while the cost of pledging is as high as Bt28.30 a kilogram, he said.
The cost of rice stocks managed by the government was also very high at Bt3,300 a tonne, while private exporters would spend only Bt1,000 to manage a tonne of rice before shipment. Although the price of Thai rice had been cut, Thailand faced difficulty selling it overseas and competing with rivals. This was because overseas traders knew Thai rice was being stored in enormous amounts and continued to deteriorate in quality as the pledging method has gone on, he said.
First published in The Nation, 16th October 2013