In recent months, many rice farmers delivered their crops to the government, and were issued with pledging receipts.
But they have not yet been paid. Media reports reveal there are more than one million such receipts awaiting payment.
This problem has caused great hardship to several hundred thousand farmers, forcing them to turn to loan sharks.
What caused this problem?
I point to a lack of planning by caretaker Finance Minister Kittiratt Na-Ranong.
I have to go back to the time when I was finance minister. On Sept 13, 2011, I proposed to the cabinet a fund for rice pledging at 410 billion baht. But it was designed to be a revolving fund. The fund would be used in rounds. In the first round, it would be paid out when the government received the rice crop. And it would be replenished after the government sold the rice, to give us money for the second round, and so on.
I proposed the revolving fund format to enforce fiscal discipline.
The aim was to prevent overspending. To have enough money for subsequent rounds, the government would have to sell enough rice stock to replenish the fund. I feared over-stocking. As chairman of the Bank for Agriculture and Agricultural Cooperatives (BAAC), I told the BAAC in board meetings to urge the Commerce Ministry to make early sales.
But as it turned out, the ministry chose not to do so.
Rice experts gave me two reasons for the ministry's reluctance to sell. First, the sales would lower world prices, and depress the value of the remaining stock. The second reason may possibly involve what the National Anti-Corruption Commission is looking into right now.
Holding back rice sales resulted in a lack of cash flow. Money for subsequent rounds gradually dwindled and soon there was little left. The mechanism that I had set to ensure fiscal discipline was working well.
Today, can the government borrow to pay the farmers?
Had the finance minister planned well ahead, he would have foreseen the problem and proposed to the cabinet that it expand the pledging fund. But this had to be done before the dissolution of the House. Unfortunately he didn't. When the House was dissolved, the finance minister virtually led the government to a political dead-end.
As a caretaker government, it cannot take on any loan because it will breach Section 181 (3) of the constitution which prohibits a caretaker government from carrying out or approving any projects that will create financial obligations for the next government.
Even though the minister is now well aware of this limitation, he still urged the cabinet to seek permission from the Election Commission (EC) for a 130-billion-baht loan.
This will be difficult, however. The programme was approved as a revolving fund. It's simply not possible for the government to take out additional loans to replenish the fund. Therefore I doubt whether the EC can give permission. I suspect the government only wanted to show the farmers it had made an effort, but the EC is to be the culprit.
Can the government force the BAAC to use its liquidity to partially pay the farmers?
The bank's management and its union disagreed with this move as it would be without a formal guarantee from the caretaker cabinet. It will be imprudent too. The bank is a commercial financial institution; it needs liquidity for its normal businesses. Dumping all its money into the rice scheme would be suicidal. The bank's executives will also have to take personal liability for any damage that may occur.
Can the government ask for help from the Government Savings Bank, Krung Thai Bank or other state-owned banks?
Any executive of such banks will also put themselves at risk.
Section 181 (3) of the constitution prohibits a caretaker government from "using state resources or personnel to do anything that will have impacts on the result of the election". Should the government order state-owned banks to help, both the cabinet and the bank may face charges of wrongdoing.
Can the farmers collectively sue the government and the Pheu Thai Party?
If they sue in the Administrative Court, it is doubtful whether the court can go beyond what the constitution stipulates. If they sue in the Civil Court, the final ruling may take years.
If the general election takes place on Feb 2, and the farmers vote for the Pheu Thai Party, will they get their money?
A new government, unlike a caretaker, can seek new loans for the scheme. But scenarios will dictate the timing. Should there be a politically neutral government arising not from the election, either from the resignation of the caretaker Prime Minister Yingluck Shinawatra or from a coup, the borrowing can take place immediately.
However, if it is a government which takes office from an election, the timing will be uncertain. It will take repeat elections to get enough MPs for parliament to convene. There might also be court cases after the vote count, delaying the government's formation.
In sum, the time factor is certain for a neutral government, less so for the elected one.
This does not mean I support any type of government in particular. My point here is to tell the farmers to prepare themselves and accept the situation as is. Or if they cannot, they should at least know the causes of their problems.
Thirachai Phuvanatnaranubala is a former finance minister.