Experts have yet again voiced concerns about the government's resolute intention to continue the costly paddy pledging programme, saying it will ruin the position of Thai rice in the world market, open the sector to corruption and undermine fiscal discipline.

Nipon Poapongsakorn, a senior economist at the Thailand Development Research Institute, said that apart from obvious losses due to the gap between the market price of rice and the pledging price, the scheme favours medium-sized and large rice farmers and millers over poor farmers.

The cost stemming from the price differential and related operations is estimated at 172 billion baht, against 480 billion baht spent on 14 million tonnes of paddy the government has bought from farmers so far this year.

Mr Nipon expects 65% of the fiscal compensation to reach 3 million farm households. But he noted that the data showed less than one-fifth going to low-income farmers, with middle-income farmers receiving two times the compensation of poor farmers.

"Similar subsidy schemes in other countries have conditions attached. But in our case, the subsidies are all open in terms of quality and volume," Mr Nipon said.

He said the pledging scheme also raises the question of whether stocks have been released to favour any particular group, as domestic rice prices have remained low despite the state's large stockpile.

Chookiat Opaswong, honorary president of the Thai Rice Exporters Association, said the high pledging price has caused consumers abroad to drop their loyalty to Thai rice. Rice exports fell 44% in the first nine months of the year. Local exporters are losing customers, though they still lead the world in terms of value.

"In a situation in which 32-33 million tonnes of rice is traded in the world market, with a supply squeeze of 2-4 million tonnes per year, some players handily substitute," Mr Chookiat said. "World demand for rice has not jumped."

He said another concern is that the pledging programme is an incentive for farmers to use pesticides and chemical fertilisers to quickly produce large quantities to pledge, instead of improving quality. Thai rice has lost competitiveness in terms of niches to regional countries.

Decha Siripat, a member of the Khao Kwan Foundation, said problems faced by Thai farmers in general include high indebtedness and increasing production costs.

The pledging programme has caused landlords to increase rental fees for farmers and fertiliser agents to raise prices. A dwindling number of farmers own land, with more than 60% needing to rent to grow crops.

Each farm household is estimated to be 500,000 baht in debt, Mr Decha said.

"The scheme fails to resolve two key problems farmers face: land ownership and high indebtedness," he said. "Despite the approaching Asean economic integration, local farmers are grappling with increases in operating costs and a decline in quality."

Mr Decha said the government should revert to imposing an import tax on pesticides and curbing advertisements as an approach to help farmers reduce the use of chemicals in growing rice.

M.R. Pridiyathorn Devakula, a former deputy prime minister, said losses from taxpayer money would also be deriving from the interest burden of the Bank of Agriculture and Agricultural Cooperatives' borrowing to operate the scheme.

The government could push the public debt to the sustainable boundary of 60% of GDP over the next six years, assuming continuity of the scheme and the plan of off-budgetary spending on infrastructure.

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