Market intervention should be last resort
Academics and rice experts have repeated their calls for a major overhaul of farmers’ assistance and subsidy programme, saying market intervention should be the last resort to be applied by the government.
“We don’t object to farmers’ assistance measures or any subsidies, as long as the government has enough money,” said Nipon Poapongsakorn, a distinguished fellow at Thailand Development Research Institute. “But in the current situation in which the government is in heavy debt and desperately needs massive capital to stimulate the sagging economy and invest in infrastructure development, we think it’s imperative state subsidies on farm produce are put on hold.”
If the subsidies remain necessary, he suggested the government does not undertake any measure in the way of market intervention and focus its aid only on needy and poor farmers, as previous experience has proved that market intervention by offering higher-than-market price has incurred massive losses and destroyed the overall market.
A limit on subsidies should be imposed on each household, while poor and needy farmers should be clearly defined and identified.
Mr Nipon himself is doing a study and survey on poor farmers nationwide for the Bank for Agriculture and Agricultural Cooperatives. His preliminary study found about 10% of the population or about 670,000 could be classified as “poor”, with family members earning less than 1,200 baht per month per person.
Direct subsidies should be given to poor farmers both in the form of production cost compensation and paying the difference between target and market prices instead of buying up the yields.
For general farmers, the subsidy should be offered when farm produce prices are low, while the subsidy should be capped for instance at not more than 10 tonnes per family for rice and the prices should be based on averaged prices over the last few years.
“The key point is that state agencies should not be allowed to get engaged in the process. They should function just as a supervisory unit for controlling the quality of raw materials and as registration office for participating outlets that sell raw materials such as fertiliser and insecticides to farmers,” he said.
Mr Nipon also called for a revamp of the National Rice Policy Committee, allowing outsiders in the rice industry such as representatives from the Thai Rice Mills Association, Thai Rice Exporters Association and Thai Rice Farmers Association to ensure there is a system of checks and balances.
Rawee Rungruang, chief of a network of farmers, said most farmers favour mechanisms that help curb farm price slump and subsidies on their production costs.
“To ensure sustainable assistance to farmers and development, we desperately need government support for a rice farmers’ act and the establishment of a farmers’ council,” he said. “Since rice farmers are the majority of the population, we should have our own council, like the Lawyers Council of Thailand and the Federation of Thai Industries, as a venue for brainstorming and working out ways to upgrade farmers’ lives.”
In the absence of a farmers’ council, he said what farmers want the most is “revolving funds” from which they can borrow, not the populist price-pledging scheme.
Vichai Sriprasert, honorary president of the Thai Rice Exporters Association, said the rice-pledging scheme should be discontinued as it is used not only as a tool to lure potential voters but also as a channel to engage in corruption. More importantly, it distorts the market mechanism.
“We don’t mind the government setting aside a budget to help rice farmers,” he said. “But the farmers enjoying the subsidy should be proven to be poor, and money should go to support programmes that help reduce production costs and increase productivity such as land improvement, irrigation expansion, high-quality rice varieties, rice quality improvement and technology promotion.”
He also called on all related parties to impose quality standards on paddy, while the government needs to invest in weights and measures and moisture meters not only to allow farmers to know their paddy quality but also curb any irregularities caused by weights and measures.
First published: Bangkok Post, June 02, 2014