While the National Rice Policy Committee (NRPC) on Monday reversed its decision to cut the pledging price for ordinary paddy and maintain it at 15,000 baht per tonne until Sept 15, the Commerce Ministry will try to speed up rice sales and try to sell up to five million tonnes in three months.
Farmers in Pathum Thani rush to harvest their paddy in order to get the pledging price of 15,000 baht a tonne. Photo by Thiti Wannamontha.
In the South, the 15,000 baht pledging price will remain in place until Nov 30.
The government has been pressured by farmers to maintain the price after it decided on June 18 to reduce the pledging price for ordinary paddy to 12,000 baht while the price for other types of rice would be cut by 20%, effective from July 1.
The reversal means the pledging prices for all types of rice will return to the original ceilings announced before the Yingluck Shinawatra-led government entered office. The prices will be tabled in cabinet for consideration on Tuesday.
However, the NRPC on Monday confirmed its decision to limit the pledging amount to 500,000 baht per household.
Wichian Phuanglamjiak, president of the Thai Agriculturalist Association, said farmers were pleased with the decision and will continue to support the Pheu Thai Party which had shown courage in tackling the problems of farmers.
However, if there is a cut in the pledging price for the next crop, the government should allow farmers to express their opinion and help them to cut production costs.
The introduction of the rice pledging programme in October 2011 has created huge losses with estimates varying from the government's figure of 136 billion baht to as high at 500-700 billion baht by veteran rice exporter Vichai Sriprasert, the honorary president of the Thai Rice Exporters Association.
With criticism of widespread corruption in the pledging scheme, the premier has reshuffled her cabinet lineup and removed Boonsong Teriyapirom from the position of commerce minister - a post which is integral to the pledging programe.
New Deputy Commerce Minister Yanyong Phuangrach said the ministry plans to urgently sell four to five million tonnes of grain from the rice price pledging stockpile within three months.
Mr Yanyong was speaking as he and new Commerce Minister Niwatthamrong Bunsongphaisan on Monday began their first day of work after being sworn into office by His Majesty the King on Sunday.
He was confident the ministry would be able to sell eight to 8.5 million tonnes of rice this year, as targetted.
Mr Yanyong, formerly a permanent commerce secretary, said the ministry has set an initial release price at US$500 per tonne, but admitted it remains flexible.
The preferred method would still be government-to-government deals, but the ministry would allow the private sector a bigger role in the process.
Mr Niwatthamrong said the government is committed to pursuing the rice pledging policy even though it has run into problems because of the excessive stockpile and strong price competitiveness in world markets.
Settling into his new post, Mr Niwatthamrong said his mission at the ministry is to release the government rice stockpile, estimated at 17 million tonnes, as quickly as possible.
Rice pledging is a hallmark policy of the Pheu Thai Party. The government promised to buy "every single grain of rice" from farmers in Thailand at about 30% above market price in 2011 with the hope of cornering the world rice market and forcing up the price. It failed.
Mr Niwatthamrong admitted that Thai rice could not compete in the world market now because the government set the pledging prices too high - 15,000 baht per tonne for ordinary white rice and 20,000 baht per tonne for fragrant rice.
According to the Rice Exporters Association, the global rice price has lingered at around US$450, or 13,500 baht, for rice from India and Pakistan but Vietnamese rice is around $85 cheaper per tonne, or around $365.
"The rice pledging scheme must continue because it gives rice farmers a better income. Without the pledging project farmers would receive even less from the sale of their rice, because Vietnam is selling its rice at a very low price and India is exporting more," the new commerce minister said.
He would therefore aim at giving farmers the best pledging price possible while making sure that the price of Thai rice remains competitive on the world market.
"Thai rice won't sell on the global market if the price is too high," he said. "When we can't sell the rice, we run into the problem of excessive stockpiles, which causes many other downstream problems."
Critics and exporters say it will be difficult for the government to achieve sales of 4-5 million tonnes over the next three months.
"The sales target is a relatively tough one over three months if it cannot be done on a government-to-government basis," said Korbsook Iamsuri, president of Thai Rice Exporters Association. "Given the private sector's capacity, we're not capable of being able to sell such a big amount as that would mean having to release not less than one million tonnes a month to achieve the target - and that's against not more than the 500,000 tonnes a month we are selling currently.''
She said the rice market is inactive at a time when the latest output from Vietnam is about to be released.
Nipon Puapongsakorn, a distinguished fellow at the Thailand Development Research Institute and its former president, said the government should release the rice using transparent methods without advance notice otherwise it will cause a drop in the price. But the government should explain any successful deals to the public. It should also encourage more participation from the private sector and not limit it to a few exporters.