There is both good news and bad news about the rice pledging scheme, events which seem to have been overshadowed by the current political turbulence.
The good news first. Deputy Prime Minister and Commerce Minister Niwatthamrong Bunsongphaisarn told the media upon his return from China earlier this week that he had clinched a deal for one million tonnes of 5% white rice. Under the government-to-government deal, he said, China has the right to change the type of rice from 5% white rice to Hom Mali or Hom Pathum fragrant rice, but the selling price will be based on the world market price. Delivery of the million tonnes of rice will be made in three shipments, with the first shipment of 500,000 tonnes tentatively set for next month, the second of 300,000 tonnes in May and the rest next October. The rice price is also based on the world market price. Despite the Commerce Ministry’s overall track record of a lack of transparency and unreliable claims of rice sales, Mr Niwatthamrong should be given the benefit of doubt this time for his tireless efforts to sell our stockpiled rice.
The Bank of Agriculture and Agricultural Cooperatives (above) is sunk deep in debt because of the failed rice pledging scheme, says Veera. Bangkok Post photo
Compared to the huge rice stockpiles still left unsold in warehouses throughout the country, one million tonnes may not seem a big deal. But, at least, it will bring in some revenue and help ease the financial burden of the cash-strapped Bank of Agriculture and Agricultural Cooperatives (BAAC), the main financier of the rice pledging scheme.
And here is the bad news – the BAAC which is practically broke. The bank has had to delay payments to farmers who have collectively pledged (sold should be the proper word) about 1.2 million tonnes of paddy to the bank, because it has simply run out of cash.
According to the bank’s president, Luck Wajananawat, the bank has sought permission from the National Rice Policy Committee to raise a 140 billion baht loan to partially cover the cost of the rice pledging scheme for the 2013-14 harvests. But the committee will need approval from the Finance Ministry, which was earlier reluctant to give permission because the bank has already used up the 500 billion baht fund capped by the ministry for the scheme.
Mr Luck said that the bank has so far spent 680 billion baht to support the scheme since 2011 and has received only 140 billion baht from the Commerce Ministry from rice sales.
Commerce Ministry has been slow in selling rice because there are no big buyers because of the high prices asked for the Thai grains and a host of other problems which have discouraged buyers from placing orders. China seems to be the biggest buyer so far.
Even if the BAAC received the go-ahead to the 140 billion baht loan, this represents just half of the problem that needs to be solved. The bank still needs 130 billion baht more, and it hopes that this amount will be covered by repayments from the Commerce Ministry – a dim prospect given the slow rate of rice sales. The likelihood is that the bank may have to seek further permission to borrow yet again.
The big question is: how much longer before this government accepts the reality that the rice pledging scheme is a big mistake and badly in need of a major overhaul, or being dumped completely?
Sadly though, it seems the government will never admit to any mistake of its own making.