Buried under by rice subsidy scheme

FARMER Boonying Thongbai from central Thailand sold 26 tonnes of rice to the government four months ago and has been waiting ever since to be paid.

By the time she joined fellow farmers outside the Ministry of Commerce on Thursday to demand payment, she was already about 300,000 baht (S$11,600) in debt.

"Our protest has nothing to do with the People's Democratic Reform Committee," she told The Straits Times, referring to the group trying overthrow the caretaker government in the past three months. "But if the government cannot work, it should resign and let other people work."

The beleaguered government - hamstrung by incomplete elections and struggling to maintain authority over street protesters with reluctant security forces - is facing the wrath of farmers who are demanding overdue payment for rice they sold to the state under a rice pledging scheme.

Back in 2011, the scheme was a key campaign pledge that helped sweep the Puea Thai party into power. The state, the party promised, would buy every single grain of rice from farmers at prices of up to 15,000 baht a tonne, which was about 50 per cent above world prices at the time.

Now, the controversial scheme is dying a slow death.

The caretaker government cannot, and will not, commit to buying rice from farmers beyond this month, when the main crop season ends. "The next crop is up to the next government," caretaker Deputy Prime Minister Phongthep Thepkanjana told reporters recently.

Unfortunately, it is not clear when or how Thailand's new government can be formed.

Efforts by anti-government protesters to undermine Puea Thai by sabotaging the general election on Feb 2 resulted in slightly less than half of the electorate casting their votes. Another round of polls is due to be held even as the opposition Democrat Party works to get the election annulled. Impeachment probes by the national anti-graft body threaten to disable the Puea Thai administration even if it manages to return to power.

The rice scheme already had its share of problems before the protests began.

Expenditure on the scheme is off-budget as it is funded by the state-owned Bank for Agricultural and Agricultural Cooperatives (BAAC). The government had to pay for milling and storing the rice once it became too expensive to sell, which allowed India and Vietnam to overtake Thailand as the world's top rice exporters.

Thai farmers jacked up production to cash in on the price. They complained that rice millers, who issued them coupons with which to seek payment from BAAC, were creaming off a premium.

There were also allegations that rice was being smuggled in from neighbouring countries to take advantage of the inflated prices.

Although official estimates are not available, the government, which has spent more than 600 billion baht buying the rice, is expected to incur huge losses once it is offloaded at market prices.

A BAAC bond issue to fund the programme met with a tepid response last year, while attempts to secure bridging loans were rebuffed by other banks. Anti-government protesters also warned banks against supporting the scheme.

The caretaker government, which has been holding auctions this year to sell the stockpiled rice, is still short of about 120 billion baht to pay farmers, estimates Commerce Minister Niwatthamrong Boonsongpaisan.

"We have had this programme for two years without a problem," he told The Straits Times. "But the loan process has been delayed now because protesters are influencing banks not to give loans to the government."

The United Nations Food and Agriculture Organisation estimated that the rice stockpile would hit 20 million tonnes this year.

Rice exporters are bracing themselves for a drop in prices once government stocks are released for sale, but they think the pain would be short term.

"Nothing could be worse than this scheme," Mr Charoen Laothamatas, the president of the Thai Rice Exporters Association, told The Straits Times.

"The best thing is to stop it first. How we manage the stocks, and what we do next, will have to wait for the next government."


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