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Thailand's rice subsidy faces constitutional challenge

Publication Date : 28-09-2012

 

A group of 127 academics, members of the public, university students and some rice farmers yesterday submitted a written complaint to the Constitution Court over seven key points of the Thai government's higher-than-market price-subsidy policy that they claim breaches the charter.

"We don't want to overturn the [rice pledging] project but really need the government to lower such a high subsidy price to 9,000-10,000 baht (US$291 to $324) per tonne, with volume limited to 25 tonnes per household to reduce damage to the country," Adis Israngkura, dean of the School of Development Economics at the National Institute of Development Administration, said yesterday.

They claim the pledging policy violates Article 84 (1) of the Constitution by causing market distortion and the disruption of normal trading practices.

The group pointed out seven key concerns that have a big impact on the country's rice farming and export.

First, the scheme fails to develop good-quality rice because its focus is not on quality but on quantity, allowing all rice grains to be pledged at the high prices.

Second, farmers lack incentives to concentrate on the lengthy development of high-quality rice. They are occupied with rapid rice cultivation to catch up with the scheme's time frame.

Third, Thailand will face falling rice quality, as the government has to manage a huge rice stockpile for a long time without a way to release the inventory to the market.

Fourth, the higher-than-market price subsidy has sent the wrong signal, as farmers will rapidly expand paddy fields beyond their capacity. It will also distort the planting of other crops.

Fifth, the policy has destroyed Thailand's rice growing and trading system, which has been gradually developed for centuries.

Sixth, the high subsidy prices have undermined Thailand's export competitiveness. Rice exports have dropped 46 per cent from 7.4 million tonnes in the same period last year to 3.9 million tonnes now.

Seventh, the government's policy to release its huge rice stocks is set for only government-to-government contracts, which means Thailand will lose money from any export lot as the price will be quoted lower than the subsidy prices. In this way, the government is spending Thai taxpayers' money to subsidise consumers overseas who can buy cheap rice.

Led by Adis, the group is asking for a court inquiry to stop or cancel the pledging scheme.

The policy contravenes the Constitution, which encourages a free and fair economy using the market mechanism to achieve sustainable development, the group claims.

The government should avoid any practice to control a business that obstructs the country's economic development and should not manage any business that will directly compete with the private sector, except if is to protect the country's interest or to ensure security of the state and mutual benefits, Adis said.

The scheme will also push up production costs, he said.

The government offers a high price of 15,000 baht a tonne for 100-per-cent white rice and 20,000 baht for jasmine rice.

According the Bank for Agriculture and Agricultural Cooperatives (BAAC), the subsidy costs the government 290 billion baht annually, of which 90 per cent is for the rice price and the rest for management and maintenance expenses. However, the programme is estimated to generate income of 193 billion baht, cutting the loss to a net 98 billion baht.

"If the submission is out of the court's jurisdiction, we will look for a new channel to move on this case," Adis said.

The BAAC said yesterday that the Commerce Ministry would return to the bank the 50 billion baht earned from the rice-stock releases. This payment will allow the bank to continue the price-pledging programme for two more months for the harvest season starting early next month.

*US$1=30.8 baht

 

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