Losses from the government's rice pledging scheme for the 2011-12 harvest year are estimated to reach 200 billion baht, far above the Finance Ministry's earlier forecast of 70-100 billion baht, says a source.
The new estimate is based on the actual amount the government has received from rice sales and the estimated amount the government should receive by multiplying rice in stockpiles by the current market price, said the source, who is on a committee tasked with handling accounting for the scheme. During the harvest year, the government spent 320 billion baht to buy 22 million tonnes of rice from the first and second crops.
The rice scheme was part of the Pheu Thai Party's election campaign in 2011 but has become its most controversial policy due to its hefty losses and potential corruption.
The UN Food and Agriculture Organization (FAO) said global rice output this year will increase by 16 million tonnes of unmilled rice or 2.1% to 747 million tonnes. Production of milled rice will be 498 million tonnes.
Last month, the price of 100% grade B white rice stood at US$586 a tonne, down by 4% from January.
Rice bought under the pledging scheme averages about $800 a tonne when the cost of milling rice is included, while the current market price is about $560.
Rice in the government's stockpiles will be the main factor used to determine the rice market's situation in the period ahead, the FAO report said.
It added that Thailand's rice stocks are expected to hit a record high of 16.3 million tonnes at the end of the 2012-13 harvest year. Most will be in government stockpiles.
Apart from the big spread between the cost of the pledging scheme and the global rice price, the cramped areas of rice depots and the baht's strength are also taking a toll on the subsidy programme. The government is obliged to pay a 3% interest rate for the 500-billion-baht revolving fund used to buy rice.
The source said the budget will not be enough to finance the scheme for the next harvest year. The government is estimated to have spent 587 billion baht in the last two harvest years, while the Commerce Ministry is expected to obtain only 220 billion baht from selling rice under the government's stockpiles.