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Loss-making rice sales 'only way out' for Thai govt
Publication Date : 05-02-2014
Thai govt seems driven into a corner with only one choice left to pay off protesting farmers - sell rice in stockpiles, potentially at a loss
However, the government will miss one sale that it had counted on after a Chinese trading partner under a government-to-government deal cancelled its contract to buy rice from Thailand.
The government has failed to find financing, as some legal issues remain unclear. It sorely needs at least 130 billion baht (US$3.9 billion) to pay off more than a million farmers who had pledged 10 million tonnes of paddy worth more than 160 billion baht with the government. Some groups of farmers in the Central region are still blocking some routes to the North and South in protest.
The finance ministry came up empty-handed when it held an auction for a 20-billion baht bridge loan last week, which was meant to be part of 130 billion baht in funds that the government planned to secure to settle bills with farmers. The success of the next auction scheduled for tomorrow is still in doubt.
The Office of the Auditor General has sent separate letters to Prime Minister Yingluck Shinawatra and Finance Minister Kittiratt Na-Ranong on its investigation into the rice-pledging scheme. It said the government should speed up its sales of rice from its inventory and report the results to the committee responsible for auditing the pledging project. Then the committee can close the books for all crops under the pledging project since 2004-05 in a bid to promote further public disclosure.
Caretaker Commerce Minister Niwatthumrong Boonsongpaisan said the government would proceed with the sale of 400,000 tonnes of rice from the state's stocks, doubling its previous sale plan, by auction. It would disclose the terms of reference for the auction tomorrow. Interested parties are required to submit quotes by next Wednesday. The auction results will be made known on February 14.
10 billion baht for 1 million tonnes
Niwatthumrong said the government would realise some proceeds from the sale of rice this time.
"If we can release 1 million tonnes of rice, we will have made 10 billion baht," he said.
The government has tried both to sell rice and secure a loan so that it can pay farmers as quickly as possible, he said.
Last month, the government sold 1 million tonnes of rice, with 860,000 tonnes via private traders for export and the remainder via the agricultural futures market.
China-based Bei Da Huang has cancelled its order for 1.2 million tonnes from Thailand, citing concerns over legal problems, he said.
The National Anti-Corruption Commission claimed in its graft probe into the rice-pledging project that the G2G counterpart with the Thai government should be a state-owned enterprise under the central administration, but Bei Da Huang is a provincial enterprise.
The Thailand Development Research Institute has recommended that the government in the short term should raise funds by releasing rice from stockpiles instead of securing new loans to pay farmers what they are owed. Then it should suspend the pledging project in the long term.
"As the only way out, the government is about to sell rice from the stockpiles immediately," TDRI economist Ammar Siamwalla said.
*US$1 = 32.75 baht