Finally, the government has conceded and decided to sell the millions of tonnes of rice held in stockpiles since last year at the market price - and take an embarrassing big loss as a result.
The admission came on Thursday from the mouth of PM's Office Minister Nawatthamrong Boonsongpaisan - instead of Commerce Minister Boonsong Teriyapirom, the man in charge of the rice pledging scheme who has repeatedly said the grain would never be sold at a loss.
Mr Boonsong's claim ignored the fact that there have been no real buyers, only the non-existent buyers on government-to-government deals fantasized by the Commerce Ministry.
Mr Boonsong, when asked, weakly replied that it is an appropriate time to sell the rice because of a shortfall in rice production as a result of a drought, but did not really bother to explain. Does this even make sense?
Nor was any reason given by Mr Nawatthamrong about why the rice stockpile needs to be sold at a loss now. He said only that interested buyers would be invited to place bids.
It seems to me there are two reasons for the sudden turn about.
First and foremost, there is little or no space left in the existing warehouses to store the second crop harvest due to begin next month.
At least 10 million tonnes of milled rice are currently held unsold in the warehouses and there will be another seven million tonnes or so of paddy from the second crop to be bought this year under the rice pledging scheme.
At least the harvest estimate is down from the 11 million tonnes earlier predicted, because the shortage of irrigation water has cut expected yield by about four million tonnes.
The second reason is that there is a shortage of funds to buy the second harvest, because the Commerce Ministry has been unable to sell the grain, despite its claims to the contrary, because of the unrealisticly high prices as a result of the rice pledging scheme.
It has now been estimated that only 100 billion baht would be required to buy “every grain” of rice from the second crop, instead of the 175 billion baht earlier estimated, thanks to the harvest shortfall due to drought.
The problem is that the state-run Bank of Agriculture and Agricultural Cooperatives (BAAC), the chief fund provider of the scheme, is experiencing a liquidity problem and may not be able to fund the scheme unless there is an injection of fresh funds from the government.
Or unless it receives repayments from the touted "rice sales" from the Commerce Ministry’s Public Warehouse, Marketing Organisation for Farmers and the Foreign Trade Department.
BAAC reported it had so far received 65 billion baht from rice sales by the Commerce Ministry. But the Foreign Trade Department said it had sent the Finance Ministry 80 billion baht from rice exports. Whatever the real amount received by BAAC, the indisputable fact is that the bank is short of cash to continue funding the scheme.
The truth seems to contrast with what Deputy Finance Minister Thanusak Lek-uthai told the parliament on Thursday about the bank’s financial situation. He said that the bank is safe and sound and its liquidity is three times that required by the Bank of Thailand. The bank performed well in the past two years and paid its staff a six months bonus last year, he said.
But the ability to pay bonus in a state enterprise like BAAC has nothing to do with performance or the balance sheet. It has been a tradition that if not observed would cause nightmare problems for the management from the labour union.
Even if the rice is to be sold at a loss, it is not clear whether buyers will be clamouring to buy it.
Rice exporters and potential buyers are no fools and they know they can wait. Tthe Commerce Ministry does not have that luxury of waiting, because it needs to clear the rice stockpile quickly to make room for new harvest due to arrive at the front gates of the warehouses next month.
That is why the government is desperate and hence the decision to sell at a loss.
But how much of a loss is acceptable? The government or the Commerce Ministry would be fortunate indeed if it can 60% of the prices paid under the scheme – 15,000 baht per tonne of white rice and 20,000 baht a tone for Hom Mali grain. And that alone translates into a 40% loss, excluding the costs of storage and management.
Adding in the profits expected by the rice buyers, the cummulative loss for the government - that is, the taxpayers - will surely be 50% or more.
This will deal a blow to the government and the man behind the scheme. But despite the failure, there is no sign yet that the scheme will be dumped or revamped. Recent talk about reducing the pledging prices has drawn threats of mass protests by farmer leaders, prompting the government to backpaddle. In a way, the government is caught in a dilemma, like a man riding a hungry tiger – he cannot dismount because he would be eaten by the beast, or he can ride on until he is exhausted and finally falls and then be eaten.
This white elephant rice pledging scheme is just one of the populist schemes which are steadily and increasingly drying up the state coffers without our knowledge, because no one in the government will give us the truth about the real state of our financial health.
Consider what happened in the parliament on March 5. Three gambling-related bills were tabled for debate in the Senate. Two bills seeking to legalise all illegal gambling and betting activities, such as soccer betting, slot machines and cock fighting, and the other to authorise the Lottery Office to launch new lotteries besides the bi-monthly draw.
Why legalise the illegal gambling and why intoxicate our youth with gambling and betting if the government’s financial condition is in good health? Gambling, and taxing it, is the fastest and easiest way for the government to make quick money - and this should clearly answer the question.