Pay benefits directly to farmers, government told

Former deputy prime minister and finance minister Pridiyadhorn Devakula on Tuesday submitted an open-letter to the Prime Minister Yingluck Shinawatra calling for the end to the controversial rice pledging scheme.

MR Pridiyadhorn Devakula urged the government to dump its rice pledging scheme. (Photo by Somchai Phoomlard)

He showed his letter to reporters before attending a forum on the government’s rice scheme organised by an anti-corruption group.

MR Pridiyadhorn said in his letter that the rice scheme had failed to distribute income to farmers as was expected, and it had caused damage to the country’s fiscal status.

He cited figures showing that in the two years since implementing the programme, with a total of 48 million tonnes of paddy involved, the government had lost at least 425 billion baht, but rice farmers gained benefits amounting to only 210 billion baht.

More importantly, those who were not farmers gained more than 115 billion baht in benefits, showing that the government had failed to prevent corruption in the rice scheme, he said.

“After learning this fact, if you still believe in your close aides and continue the rice scheme for a third year, it will mean that you have allowed your subordinates to run the country in the way that leads to severe damage to the country’s fiscal budget.

“I do understand that you want to help farmers have better incomes, but you should use other methods that cost the state coffers no more than the benefits gained by the rice farmers.

“The methodology must effectively prevent non-farmers from gaining such benefit and really enhance income distribution to the poor famers.

“Moreover, the government should not take the rice into its own hands, but should allow rice trading via the trade system of the private sector, which works well, and without causing any damage to the state,” he said.

In his letter, MR Pridiyadhorn suggested the prime minister put an end to the questionable rice scheme and instead pay direct benefits to rice farmers.

The government could set a ceiling for the benefit to be paid to each farm household, and make sure that the money actually reaches the hands of as many poor farmers as possible, he said.

This way the government could help more farmers, and large amounts of state money would not be wasted, he added.

MR Pridiyadhorn urged Ms Yingluck to seriously rethink the rice scheme and stressed that it was not too late to revoke it.

As prime minister, Ms Yingluck was duty-bound to ensure state money was not wasted unnecessarily, he said.

Ms Yingluck responded on Tuesday that she has yet to see MR Pridiyathorn's letter. She said the Commerce Minister will explain the issue and agencies concerned have yet to finalise the loss figures.

Respected economist Ammar Siamwalla, of the National Institute of Development Administration (Nida) took the same tone, saying that a rice scheme could help farmers improve incomes, but was not sustainable in its current form.

It was easy to raise rice prices to help farmers, but it could not continue in the long term, he said at the same forum.

“The rice scheme has created a critical problem and I will not take part in the effort to solve it. The government created the problem and therefore it must be held responsible for settling it,” he said.

Mr Ammar said there it is likely that global rice prices will drop sharply over the next three or four months because the market knows that a huge amount of rice is being held by the Thai government.

The amount in the government’s rice stockpile is kept top secret, but former commerce minister Boonsong Teriyapirom had admitted previously that it was about 17 million tonnes. It was lately reported that the figure now stands at ten million tonnes, which is still huge, he said.

The debt generated by the populist policy is more than 500 billion baht, exceeding the allocated budget, and it is likely to exceed the capacity of the creditors, including the Bank for Agriculture and Agricultural Cooperatives and other state-owned banks, he added.

Wichai Sriprasert, honorary president of the Thai Rice Exporters Association, said at the forum that the government should not intervene in the rice market and should use the market mechanism in exporting rice.

The market mechanism works well and it had enabled Thailand to become the world’s top rice exporter for several decades, he said.

Mr Wichai said Vietnam and Myanmar now have returned to using the market mechanism after failing in using the state mechanism for rice exports.

“The average rice production cost is about 6,000 baht a tonne and if farmers can sell paddy at 10,000 baht per tonne, farmers will get a relatively good profit,” he said.

The price of Thai rice had now been reduced to US$400 a tonne, nearly the same level as the global market, but there were still no buyers. Therefore, the state should not intervene in rice price and instead allow free competition, he added.

He suggested that the government should instead enhance developments in rice growing and help find ways to cut production costs of farmers, by promoting the use of good rice varieties and new technology, and ensuring there is an adequate irrigation system.

He said the government should not continue the rice pledging scheme, as it posed a heavy loss of 250 billion baht.

The US Department of Agriculture estimates the rice stockpile in Thailand will increase about 24% to 15.5 million tonnes in 2013-2014 as global output rises 1.7% to an all-time high of 476.8 million tonnes.

The price of 5-percent broken Thai white rice, an Asian benchmark, will drop 12% to $390 a tonne by April, a five-year low, according to the median of eight trader and analyst estimates compiled by Bloomberg.

Thailand will spend 270 billion baht ($8.6 billion) buying rice from the harvest that started this month, reversing an earlier plan to cut prices after farmers threatened to protest. The ruling Pheu Thai party won a majority in 2011 elections with support from poorer rural residents who make up 87% of the population. Thai output will gain 4.5% to 21.1 million tonnes in 2013-2014, the USDA says.

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