Out of sight, out of mind, so the saying goes. And never more so than with the government’s primary, populist policy vote-catcher – the deeply troubled rice pledging scheme.
Commerce Minister Boonsong Teriyapirom inspects a rice mill in Ratchaburi province. (Photo by Tawatchai Kemgumnerd)
It is largely out of the sight of the general public and, probably, out of their minds too because most of the mainstream and alternative media outlets no longer pay any attention to the issue – much to the relief of the government and, particularly, Commerce Minister Boonsong Teriyapirom.
But that does not mean that the scheme, although out of sight and out of mind, is also out of hot water. On the contrary, the scheme appears to sinking deeper and deeper into an abyss. More serious headaches are emerging on top of the old ones which remain unresolved.
The fact is the Pheu Thai Party's rice crop pawning scheme (that's what it really is) is crumbling, with millions of tonnes of over-priced unsold rice already in stockpiles and many millions of tonnes of new-harvest rice still to be bought and nowhere to store it, and the cash-strapped Bank of Agriculture and Agricultural Cooperatives (BAAC) in need of a new financial injection to keep the programme alive.
Rice millers are complaining there is no room in the Commerce Ministry’s warehouses for them to store the rice bought from farmers at the prices pledged by the government – 15,000 baht a tonne for ordinary paddy and 20,000 a tonne for Hom Mali paddy. Thai Rice Millers Association president Manus Kitprasert said that trucks laden with milled rice now sometimes have to wait 6-7 days at the warehouses before space is made available to store the grain.
Under the scheme, millers who bought paddy from farmers are required to have the grain milled within seven days of it being purchased. However, because of the extreme shortage of storage space in the state-run warehouses, which are still brimming with unsold rice from the 2011-2012 harvests, many millers have reportedly stopped milling the paddy.
So, how is it possible that the millers keep buying paddy from farmers and, at the same time, stopping milling the grain because there are no warehouses capable of storing it, including their own facilities?
The answer is that it is not possible. So what is the real story, the truth? Nipon Wongtra-ngarn, honorary president of the Thai Rice Millers Association, said that it is very likely that seven million tonnes of paddy “bought” by millers under the rice pledging scheme were not actually delivered to them by the farmers who, in return, were given 1,000 baht in cash for each tonne of paddy “sold”.
The unscrupulous millers possibly later used the bai pratuan papers issued to confirm these ghost rice purchases and get cash money from the Bank of Agriculture and Agricultural Cooperatives for paddy which was never delivered.
According to the BAAC and the Office of Agricultural Economics, paddy production for the 2011-12 crops (including main and second or third crops) amounted to 21.7 million tonnes, producing 12.6 million tonnes of milled rice.
Photo by Sombat Raksakul
Given the government’s policy of buying up every grain of paddy from farmers at the pledged prices, the government must already have 12.6 million tonnes of milled rice held in its own warehouses and those of the private sector. Together with 2.2 million tonnes of milled rice held over from the preceding crop year, the total rice stockpiles should be around 14.6 million tonnes.
Minus the 1.49 million tonnes of rice already delivered to buyers abroad out of the total of 7.3 million tonnes claimed to have been “sold” by the Commerce Ministry under government-to-government deals, there are at least 12 million tonnes of rice from the 2011-12 crop year still in the stockpile.
Since the Commerce Ministry has been handling the rice deals in an opaque manner and has been reluctant to disclose any details at all about the deals, on the flimsy ground that the information is classified, the actual figures of the rice still held in stock, the rice already committed to be sold and actual rice delivered under the G-to-G deals remain elusive and open to speculation.
With the 2012-13 crop year harvests hitting the market come two serious problems – where to store the rice because the existing storage facilities are already chock-a-block with unsold rice from last year; and where is the money the BAAC will use use to buy the new rice?
The second problem first. The government is to seek a huge loan, 150 billion baht, so the BAAC can carry on funding the rice scheme for the second year running.
The first problem, which is the shortage of storage space, is proving a hard cut to crack. Earlier talks about turning unused airport hangars into warehouses to store rice may become a reality if the Commerce Ministry is desperate enough, even if they are really not suited to store rice for many reasons.
It is also equally difficult to dispose of such a huge rice stockpile, because the Commerce Ministry and the government would face heavy criticism from the opposition, and others, if the grain is sold at a huge loss, or put on a fire sale. Making the situation much worse is the announcement by the Commerce Ministry that it will not sell the rice below market prices.
How the Commerce Ministry and the government will get out of this populist trap - a snare of the government's own making, is anybody’s guess. The likelihood is that there is slim chance indeed, unless they have the courage to admit their mistakes and, as such, lose face, and overhaul or drop the rice pledging scheme.
Would the farmers have sympathy for them and understand their need for a makeover of the scheme?