$780 million partial payout to Thai rice farmers approved

Government looking for way to make use of rotten rice-made ethanol requiring government support to offset costs as it may be too high. -Reuters

BANGKOK - The caretaker Cabinet yesterday approved a short-term allocation of 20 billion baht ($780 million) from the central budget to pay off debt owed to rice farmers, following a proposal by the National Rice Policy Committee.

However, the decision to allocate the funds - just part of the 110 billion baht required to pay more than 1.4 million farmers under the rice-pledging scheme - requires the Election Commission's (EC) ratification.

Caretaker Deputy Commerce Minister Yanyong Phuangrach said after the Cabinet meeting that the government would request the EC's approval for the 20 billion baht.

The rice committee proposed that the central budget should be used to partially pay for the rice pledged under the programme, while the Commerce Ministry sells rice from its stockpiles and the Finance Ministry seeks a bridging loan to meet the remaining debt.

The Bank for Agriculture and Agricultural Cooperatives will tomorrow convene a meeting aimed at seeking measures to help the cash-starved farmers.

However, the bank insisted that it would not spend its reserves in paying off the debt instead of the government.Five provinces

The EC has allowed the government to spend 712 million baht from the central budget to make overdue pledging payments to 3,971 farmers in five provinces: Chachoengsao, Prachin Buri, Uthai Thani, Phetchabun and Ayutthaya.

EC member Somchai Srisuthiyakorn said that farmers in those provinces should get the money soon. If they do not do so, then they should ask the caretaker government to make the payments. He added that if the government required additional budgetary funding, it would have to ask the EC to consider the matter again.

Meanwhile, the Government Pension Fund yesterday said it would not buy government bonds.

In a separate press conference, the University of the Thai Chamber of Commerce suggested that the next government should directly subsidise the cost of production for rice farmers, instead of employing a pledging scheme.

Aat Pisanwanich, director of the university's Centre for International Trade Studies, said the government could spend 196 billion baht on helping lower the production costs for 2 million farming households.

It should, therefore, be able to save costs and avoid over-subsidisation if it focused on easing farmers' production costs, he added.

To date, the government has spent more than 300 billion baht a year on the subsidy scheme, which is a large fiscal burden and runs the risk of the Kingdom breaching World Trade Organisation rules.

Aat said Thai rice farmers now faced higher production costs than any of their ASEAN rivals.

The average cost for Thai rice farmers is $380 per tonne, while Vietnamese farmers face a production cost of $158, and those in Myanmar, $277.