The government is determined to carry on with the populist rice pledging scheme, despite heavy losses and huge stockpiles of unsold rice left in warehouses to the point where there is scarcely any room to store new harvests due to arrive next month.
Prime Minister Yingluck Shinawatra announced on Tuesday that farmers still want the project so the government has to respond to their wishes. However, she said the scheme needs to be implemented transparently, especially the sale of rice from its stockpiles.
The prime minister's promise of transparency in rice sales is welcome. The Commerce Ministry has implemented the scheme over the past year in conditions of near secrecy.
No details have been available about the actual amount of rice sold to foreign customers under the government-to-government (G-toG) deals and their prices, as the ministry has been reluctant to part with the information claiming it is confidential. For most people in the rice export business, that's ridiculous.
Without any hard evidence produced to support the existence of such deals, it was not unusual for critics and members of the public to suspect that all the G-to-G deals claimed by the ministry were pure fantasy.
The ministry now must come clean by disclosing the details of all the claimed G-to-G deals such as the names of the customers, the amounts of rice contracted to be sold or already sold, the contract prices and dates or tentative dates of deliveries.
Moreover, new bids for the rice to be auctioned at loss-making prices as earlier indicated by Prime Minister's Office Minister Nawatthamrong Boonsongpaisan must be taken openly, with all interested buyers allowed to participate to prevent possible price collusion or favouritism for certain buyers with political connections.
But even if transparency is seriously pursued by the ministry, there are at least two worrisome problems waiting to be fixed.
The first problem, which is an immediate one, is where to store the new rice, amounting to 7 million tonnes of paddy from the second-crop harvest.
This problem can be eased only if the ministry manages to sell the rice stockpiles fast enough to make room for the new harvests.
Given the rice glut in the world market even if India's rice output is to drop substantially due to drought, it will be an uphill task for the ministry to unload its huge stockpiles fast unless, of course, it can substantially cut the sale price to be more competitive.
That will mean bigger losses for the taxpayers and more setbacks for the scheme.
The other problem concerns the financial health of the Bank of Agriculture and Agricultural Cooperatives (BAAC), the chief financier of the scheme.
The cabinet's decision on Tuesday to allow the bank to borrow another 74.2 billion baht as a revolving fund for the scheme with the Finance Ministry acting as guarantor will give the bank a reprieve to carry on with the scheme for at least another year.
And unless the bank gets repayments on rice sales from the ministry, it will again experience a revolving fund shortage and need to borrow again.
Transparency in the handling of the scheme as promised by the prime minister doesn't go far enough to address the problems.
The rice pledging scheme needs a rethink as it is not sustainable. Apart from that, it does not help the farmers as much as it helps rice millers, landlord farmers, corrupt politicians and bureaucrats.