Many questions remain to be answered about the controversial rice pledging scheme.
Rice pledging is one of the key populist policies that put the Pheu Thai Party into power in 2011.Despite the scheme’s name, it is essentially a purchase programme. The government buys the grain from farmers at 15,000 baht a tonne for paddy and 20,000 baht for Hom Mali rice, well above market prices.
The party’s promise to buy “every grain” during electoral campaigns is still reverberating despite the government deciding to dissolve the House on Dec 9 in the face of mounting pressure from a mass political rally.
But a lot of questions remain unanswered, particularly about the scheme’s heavy losses, huge rice stockpiles, tight liquidity and, more importantly, corruption allegations.
The Yingluck Shinawatra government has spent up to 680 billion baht in four harvest seasons over the last two years buying a combined 44 million tonnes of paddy about 26.8 million tonnes of milled rice.
If the handling costs worth another 90 billion baht incurred from the scheme are included, spending is estimated to amount to 780 billion baht over the past two years.
The government last August allocated a further 270 billion baht to finance the 2013-14 main crop that began on Oct 1.The main crop runs until the end of next month.
At least 11-12 million tonnes of paddy are expected to join the pledging scheme at a cost of 190-200 billion baht.
The Commerce Ministry plans to dispose of state rice stocks as planned. But the key point is that the government’s 40%-50% above-market pledging prices have made it impossible to sell rice stocks without suffering a huge loss.
The ministry has sold stocks worth only 200 billion baht since the scheme started.
“This trouble-plagued rice pledging scheme should be scrapped, as it’s proven that any further moves will lead the government to incur heftier losses,” said Nipon Puapongsakorn, a distinguished fellow at the Thailand Development Research Institute.
“This scheme not only cripples the rice market mechanism and competitiveness of exporters but also results in a deterioration of rice quality, heavy losses and, more importantly, widespread corruption allegations and liquidity problems.”
Mr Nipon believes Pheu Thai is unlikely to use the controversial rice scheme in future political campaigns.
He urges the new government to pay more serious attention to managing accounting standards and rice stocks while examining how far corruption is involved.
In addition, it should come up with a mechanism to curb any impact on domestic rice prices whenever it disposes of rice stocks.
Mr Nipon also suggested the new government scale down its assistance to serve only poor farmers and not offer a price guarantee to every single grain as proclaimed in previous election campaigns.
“What we want to see is legislation that supervises subsidies for all types of farm crops excluding livestock, as it is in the US,” he said.
“The subsidy should also be included in the annual fiscal budget so that the amount of subsidy given to farmers each year could be clearly known, with amendments needed every four years.”
Mr Nipon proposes crop insurance,weather index-based insurance or an options programme be put in place to manage key crop prices and guarantee farmers’ incomes.
For poor farmers, it is imperative for the government to offer them a direct subsidy but under limited conditions,he said.
Vichai Sriprasert, honorary president of the Thai Rice Exporters Association,sees likewise, saying the populist rice pledging scheme should be discontinued,as it is used not only as a tool to favour potential voters for politicians but also as a channel to engage in corruption.
“We don’t mind the government setting aside a budget to help the rice farmers,” he said.
“But the farmers enjoying the government subsidy should be proven to be poor, and the spending should go to support programmes that help to reduce production costs of farmers such as irrigation system expansion, high-quality rice varieties, rice quality improvement and technology promotion.”
First published: Bangkok Post, January 2, 2014