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Thai govt must amend rice subsidy scheme: experts

Publication Date : 01-03-2013


The Thai government cannot avoid making amendments to the rice-pledging scheme, though it abruptly cancelled today's meeting of the National Rice Policy Committee (NRPC), rice exporters and academics said.

Technical problems involved with the scheme, including huge costs and limited warehouse space, will eventually force the government to introduce some changes, they said.

Commerce Minister Boonsong Teriyapirom yesterday said the NRPC would not convene today, as earlier announced by the ministry's permanent secretary Vatchari Vimooktayon. She said on Wednesday that the pledging price for white paddy rice would be cut from 15,000 baht (US$500) to 13,000 baht or 14,000 baht for April's second-crop harvest season. Vatchari said a revision of the pledging price would be proposed to stimulate exports of Thai rice in the face of stiff competition from countries with lower prices.

If the price is cut, it will be the first revision of the programme, launched in 2011 amid strong criticism. Exporters have cried foul over the high rice price against a fall in global prices. Data show that Thailand's rice-export volume has fallen behind that of Vietnam.

Meanwhile, the government has also faced strong criticism over corruption involving the scheme, estimated by the World Bank to have cost the country more than 100 billion baht in the 2011-12 harvest year. Boonsong said lowering the pledging price was just a proposal by some agencies. The government has not yet agreed to it.

The next meeting of the NRPC is scheduled for the middle of this month.

In the first year, the government ended up spending more than 400 billion baht on the scheme for the pledging of 6.99 million tonnes. The programme has encouraged farmers to increase rice output to gain advantage from the high price. Based on the pledging scheme, 5-per-cent white rice costs US$589 per tonne, against $405 for Vietnamese rice and $445 for Indian rice.

Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said that to keep its promises to farmers, the government might maintain the pledging price. But because of fiscal constraints, it may put a lid on the amount each farmer can get from the programme.

"Officers involved with the scheme admitted that the pledging scheme had created many problems, including excessive budgets, limited warehousing space, and a drop in export volume," he said. "However, the Yingluck [Shinawatra] government, which ran on a populist policy of a high pledging price to win the election, might not dare to reduce the price. But eventually it will need to find other solutions to reduce the big losses from the subsidy project."

He said the government was very likely to limit the pledging volume or value each farmer could be entitled to so that it would not need to spend a huge amount on subsidy.

According to the Commerce Ministry, about 8 million to 9 million tonnes of paddy will be harvested in the upcoming second harvest season. So far, more than 29 million tonnes of rice has been pledged into the government's stocks during the past two years.

Chookiat added that the government was also facing a shortage of warehouses for more rice.

He said the government had ordered millers to polish their rice to reduce the space needed for stocking paddy. However, it is still facing limited capacity.

Thanavath Phonvichai, director at the Economic and Business Forecasting Centre, said the government should cut its pledging price, as it had been maintained for two years. "Rice trade has become sluggish while a lot of money is lost.

Here comes the opportunity to reduce the pledging price to help increase financial liquidity for the Bank for Agriculture and Agricultural Cooperatives," or BAAC, he said.

Meanwhile, Chanudpakorn Vong-seenin, acting president of the Public Warehouse Organisation (PWO), insisted that government warehousing space remained available for the next season. To increase capacity, rice millers can work that out with exporters, to accelerate the release of rice, he said.

Regarding the BAAC's earlier claim that the pledging fund was depleted as the PWO was slow in remitting proceeds from rice releases, Chanudpakorn said the organisation had never failed to do so. The PWO is only one of many agencies responsible for the programme, he added. "As such, if the government's liquidity for this project is depleted, it's not only because of the organisation [PWO]."

*US$1=29.7 baht


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