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Standing his ground

An architect behind the rice pledging scheme defends the programme, insisting losses should be on a par with what the previous government spent, writes Parista Yuthamanop

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The Pheu Thai Party-led government's rice pledging scheme has faced a barrage of criticism among pundits, who have come up with several versions of calculated losses that will later become public debt. 

Rice pledging can be abolished when it is no longer needed and when farmers get the prices they deserve, says Mr Olarn. (Photo by Chanat Katanyu) Other concerns include negative effects on sustainable aids to farmers, oversupply, eroding competitiveness of Thai rice exports, smuggling to take advantage of the scheme and corruption in sales.Some have drawn a comparison with the rice price guarantee of the previous Democrat-led government, which seemed to have the advantage of not having to handle massive rice stockpiles and market interference.But Olarn Chaipravat, an economist and architect of the rice pledging policy, maintains that the pledging programme can serve as a long-lasting farm price-support tool that increases income for farmers.In an interview with the Bangkok Post, he said the government has prepared to sell the rice in big lots this year, which will help repaid short-term loans to finance the scheme."The government would be able to sell more than 2.5 million tonnes of medium-grade 100% and 5% white rice in 2012/13, compared to just 1.4 million tonnes in 2011/12," he said.The amount would be sold at world market price of about US$600 per tonne quoted by US rice exporters in government-to-government (G2G) deals, compared to $450 quoted by other countries such as Vietnam, said Mr Olarn, who is also chairman of the Thai Trade Representative Office.The deals, if they go through, would vindicate the government from accusations that its G2G rice deals are fabricated."We expect import orders for 100% and 5% white rice from new customers in Asia to rise to more than one million tonnes in 2013 from less than 100,000 tonnes in 2012. We have secured the orders. There are more orders coming for Hom Mali as well as 100% and 5% white rice in 2013," Mr Olarn said.Total rice shipments increased 22% year-on-year to about 665,000 tonnes a month from October to November 2012.If the trend continues, Thailand would be able to export 8.5 million tonnes from October 2012 to September 2013 compared to 6.7 million tonnes in 2011/12, a 21% year-on-year increase."The 8.5-million-tonne export volume is close to 8 million tonnes estimated by the US Department of Agriculture in December 2012," he said.While the pledging paddy price at 40% above the previous year level could result in losses, the extent of such losses would depend on many variables including the world price of milled rice and the carrying stocking costs in 2013," Mr Olarn said.The country's rice policy should aim at increasing the supply of higher-quality rice such as Thai Hom Mali premium to serve the changing tastes of more affluent consumers in China and other Asian countries. Their incomes have risen in line with a shift of economic driver to domestic demand from exports.While Thailand has yet to produce enough Thai Hom Mali rice, prospective buyers might opt for good-quality 100% and 5% white rice.Of 30 million tonnes of paddy produced by Thai farmers each year, six million tonnes are Thai Hom Mali rice which Thailand, as the world's largest producer, sets the sustainable and long-term price of $1,100 per tonne.Another 6 million tonnes the country's paddy production are of glutinous variety typically consumed by the Japanese, Thais, and Laotians. When converted into milled product, the glutinous rice normally fetches a market price of about $800 a tonne. The remaining 18 million tonnes of paddy yield medium-quality products such as 100% and 5% white rice, low-quality broken white rice of 25-30% and extremely low-quality rice used as animal feeds."Thai Hom Mali is definitely not an issue in calculating losses from the pledging scheme. We might continue to keep medium-quality white rice until the price meets our target," Mr Olarn said. "He said the decline in Thai rice exports in 2012 did not stem from pledging policy...

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