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GOVERNMENT SPENDING
POST REPORTERS
The government is expected to endorse crop price guarantees at a maximum of 15% above market rates for the current harvest season, according to Olarn Chaipravat, deputy prime minister in charge of economic policy.
The government has decided to renew the crop mortgage scheme this year to offset falling commodity prices. The Commerce Ministry will set a guaranteed price for paddy under the state mortgage scheme at 12,000 baht per tonne - the middle of the range of 10,000 to 14,000 baht demanded by mills and farmers.
"The market price for paddy stood at 10,500 baht per tonne before the announcement," Dr Olarn said yesterday. "We had academics help formulate an appropriate price. For every type of crop, we have proposed a range of 10-15% above the market price for the cabinet's consideration."
The Bank for Agriculture and Agricultural Co-operatives is negotiating for loans from the Government Savings Bank, Krung Thai Bank, TMB Bank and Siam City Bank to fund the crop mortgage scheme, expected to cost 110 billion baht for rice, corn, tapioca and oil palm.
He said the paddy mortgage scheme targeted small-scale farmers. Therefore, the government limits the guarantee to 500,000 baht per farmer, equivalent to 40 tonnes. The government expects eight million out of the 24 million tonnes of total rice produced to enter the scheme.
The Commerce Ministry has a list of eligible farmers and will publish details of millers and values of auctions to avoid abuse of the measure.
The government also plans option contracts for Thai jasmine rice, a niche in eight northeastern provinces, as an alternative to the scheme as rice growers have silos that can maintain rice quality.
The government also calculated borrowing to suit the flow of crops. Financing is expected to peak in January when the harvest ends. Farmers are expected to begin to mortgage paddy this month, when the harvest of annual crops begins.
The government also allocated an extra 100 billion baht for fiscal 2009 to ministries overseeing social aspects including health care, tourism, culture and education. The previous plan focused on physical infrastructure like small roads and irrigation systems, Dr Olarn said.
The government has considered two approaches for disbursement: top down, from ministries to communities, and bottom up, proposed by villagers. Eligible projects will be small, worth 10-15 million baht each. The Transport Ministry will announce plans for roads so villagers can choose community projects.
"The objective of the new plan is to ensure that ministries get funds to reach every single community. Apart from top down, we also allow communities to propose projects via their provincial governors," Dr Olarn said. "We also need the support of the House of Representatives to pass the bill."
The government expects the mid-year budget to help the economy reach 4% growth in 2009 as exports and domestic demand slow due to the global recession. Dr Olarn said the extra budget was vital because of slow disbursements the previous fiscal year and knowledge that a budget deficit would persist in 2010.
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