The liquidity-crunched rice pledging scheme is approaching a critical juncture, as the caretaker government may need to put on hold any activity associated with it until the next government is formed.
Farmers harvest rice in Nong Chok district of Bangkok in July 2013. (Photo by Thananrak Khoonton)
The Pheu Thai-led caretaker government has failed to find any money to pay what has been pledged to farmers, many of whom have been awaiting payment since October.
No one can guarantee how long the farmers will tolerate delays, which could be the trigger for another farmers' roadblock at the same time the middle-class anti-government protesters are marching in the streets.
Yingluck Shinawatra's caretaker government may shrug off criticism of the scheme from such eminent organisations as the World Bank and the International Monetary Fund. But it cannot ignore the millions of farmers who form such a large part of Pheu Thai's voting base.
Caretaker Commerce Minister Niwatthamrong Bunsongphaisan on Friday promised that farmers who pledged rice under the 2013-14 main crop will be paid this month.
And caretaker Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong has called an urgent meeting with finance ministry officials for Wednesday in a bid to fund the major scheme.
He has vowed to take responsibility himself, although officials are sceptical of the legitimacy of any such move.
Mr Kittiratt will demand the Public Debt Management Office reconsider launching a 13-billion-baht bond offering that was cancelled due to high costs.
One official said no matter what Mr Kittiratt says, the fact remains that electoral regulations prohibit the government from using state human and financial resources, directly or indirectly, ahead of a fresh election.
Someone familiar with the bond scheme said: "Does he think the 13 billion baht in bonds are an old lot that gained the nod of the cabinet before the dissolution? I'm really not sure about that since new bonds would need to be issued. How could we say it was the old tranche?"
The source added that the legality of the issue will be up to the Electoral Commission.
Since the House dissolution was announced, senior Finance Ministry officials have refused to sign their names to guarantees credit for the Bank for Agriculture and Agricultural Cooperatives (BAAC) for fear they will be violating election law.
"No one dares sign off for back-up borrowing deals for state schemes. This could conceivably lead to the Pheu Thai Party being dissolved," said one of the officials involved.
Inaction by officials during this time of political uncertainty could be the last straw for the rice subsidy since the government has spent up to 680 billion baht over two years to buy paddy, exceeding the ceiling of 500 billion set by the cabinet since the scheme started.
The BAAC refuses to use its own liquidity to advance money to farmers without the national rice policy committee's approval to widen the 500-billion-baht limit.
The flagship rice subsidy has been in financial trouble since before the House was dissolved due to its 40% above-market pledging prices that has made it impossible to sell the rice stocks without suffering a huge loss.
The Commerce Ministry, which is responsible for disposing of state rice, has been unable to do its job, as the government has kept the rice stored for long periods while waiting for better prices.
Apart from exceeding the limit, the caretaker government faces huge pressure as it struggles to find money for farmers who pledged their rice under the 2013-14 crop. Some farmers have received payment since Nov 14, but many others remain waiting.
And while the caretaker government has vowed to lower the outstanding expenses incurred from previous crops to 500 billion baht at most, the ongoing scheme will surely cost it more, with the current main crop estimated at 270 billion.
A straightforward solution would be for the Commerce Ministry to sell at least 270 billion baht worth of rice this fiscal year to keep the outstanding spending under the ceiling. But it has sold only 200 billion baht's worth since the scheme started.
The legitimacy of the caretaker commerce minister in proceeding with any rice deals is also doubtful despite purchasing agreements with other governments having been made before the House dissolution.
The easiest move would be for the caretaker government to extend the ceiling of outstanding expenses and allocate 100 billion baht for loans from the BAAC for the former government's rice subsidies, which would wipe out the debt in five years. But since the big-spending Yingluck government came in, only 20 billion baht has been paid in three years.