BANGKOK - Thailand's government yesterday reversed a cut in the rice intervention price that had been agreed less than two weeks ago, apparently giving in to farmers who had threatened protests in the capital.
Finance Minister Kittirat Na Ranong told reporters that the national rice committee, made up of government officials and industry representatives, had decided to push the price back up to 15,000 baht (S$610) a tonne.
That is way above the market price and has not only made Thai rice uncompetitive on world markets, but also been a major drag on the government budget.
In the year to last September, the government said it lost US$4.4 billion (S$5.5 billion) from the scheme, which caused rating agency Moody's to warn that a target of balancing the budget might be jeopardised, and fuelled a public outcry.
The 20 per cent cut in the price to 12,000 baht had become effective only yesterday, having an immediate impact by pushing the export price of 5 per cent broken rice down to US$480 a tonne - the lowest level since June 2011 - from US$520 last Friday.
Exporters were astonished at the about-turn.
"We don't know where prices should be now. We may have to wait until the dust settles before offering prices again," said Mr Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.
"But what we know for sure is that this government has no credibility at all."
Mr Kittirat was unconcerned. He told reporters: "Everything is still going according to our plan and the framework we set out, and it should not be a problem."
He said the government estimated that there was not much rice left with farmers from their second crop, which is marketed until late September, so it would not be a huge burden on the budget to continue to buy at 15,000 baht a tonne.