Rice-pledging scheme: a death trap for govt and farmers

[webfact]

NATION ANALYSIS
Rice-pledging scheme: a death trap for govt and farmers
Achara Deboonme
The Nation

BANGKOK: -- Since the government of Yingluck Shinawatra took office, questions have been raised about its pricey rice-pledging policy, ranging from its sustainability to whether this government could fully execute the third year of the programme to satisfy millions of farmers.

Sustainability needs not be debated now, as this scheme has been proved otherwise. One estimate is that the government lost more than Bt400 billion in the first two years. All this because of the exorbitant pledging price - Bt15,000 for every tonne of paddy rice.

When it started, the price of 5-per-cent broken milled white rice was quoted at US$615.55 per tonne, or Bt18,466 at the Bt30 exchange rate. Since then, the price has been on a downtrend to $447.55 in December, or Bt14,634 at a Bt32.7 rate. The government has to take care of the difference, which is huge, as nearly all 20 million tonnes of new-crop rice enters the scheme every year.

Even if the government's term were not cut short, the scheme could not be continued without changes. The government attempted to do that in the middle of last year, when it planned to cut the price or reduce the pledging volume, only to face opposition even from the Democrat Party. Even though the Democrats hated the policy, they said the Pheu Thai Party must not change it for the sake of farmers.

With support from the biggest opposition party, the pledging scheme for the 2013-14 harvest season should have gone smoothly. However, the abrupt dissolution of the House of Representatives changed all that. Distrust of the government stemming from the controversial amnesty bill reawakened the loathing towards former prime minister Thaksin Shinawatra. Because of the combined forces of hatred towards the "Thaksin regime", the caretaker government's hands now are tied.

Because of the political protests, the Bank for Agriculture and Agricultural Cooperatives, which handles the pledging scheme, could not raise Bt75 billion via a bond offering in November. Because of negligence and possible corruption, the government lost all its credibility in managing the scheme, making raising Bt130 billion for this scheme an impossible challenge.

Even when the Public Debt Management Office (PDMO) endorsed this issue, criticism abounded. Banks shunned the office's tender call for loans.

A banker who asked for anonymity said his bank opted out of that auction over regulatory complications. The government has used up the allocated budget of Bt700 billion and as it now is in a caretaker role, it should not borrow more, as that would put a burden on the next administration. What if the next administration does not take responsibility for the loan? He said nothing when asked how that could be a problem since the PDMO had given the green light.

The government stumbled further in its attempt to find a bridge loan. Rumours raced around social media that state institutions such as the Government Pension Fund would step in. Amid thes attacks, the GPF publicly declared that there was no such plan. Krungthai Bank, 51 per cent owned by the Financial Institutions Development Fund, was also drawn into the fray.

No financial institution would want to experience what the Government Savings Bank is going through now. Its agreement to lend Bt20 billion to the BAAC led to a massive run on deposits, forcing the GSB to cancel the loan. Some savers said they had lost confidence in the bank, even though deposits at all state-owned banks are fully guaranteed. At commercial banks, they can expect a guarantee of up to Bt50 million per account per bank.

In the anti-government camp, sentiment is running high against letting the caretaker administration accomplish anything. As this spirals into a political game, the government's supporters have come out fighting. They vowed to meet and deposit money at the GSB today.

This has become a class struggle between the upper middle class, which supports the anti-government movement, and the lower class, which opposes that movement. At stake are the GSB's health and trust in the financial system. It must be a nightmare for the authorities. A run on deposits can be ignited by rumours and misperceptions.

Also at stake are the rice farmers. Despite their protests in Bangkok, the chances that they will get paid soon are slim. As ever, the Commerce Ministry has been slow in releasing rice stocks, said to have reached 17 million tonnes. Despite Chinese Premier Li Keqiang's vow to buy Thai rice on a government-to-government basis, a Chinese firm recently backed out of a deal. That is understandable. The promise was given to a government that was expected to stay in power for some time while China does not need that much rice.

However, it's not too late to release the rice stocks now, even if it means a huge loss, as this seems to be the only way to raise the needed funds for farmers and also to prove that the stockpiles exist despite rumours of their absence. Destroying inventories, as suggested by one exporter, seems ridiculous when more than 600 million people around the world are living in poverty.

Caretaker Prime Minister Yingluck Shinawatra was right to say yesterday that the issue was being politicised, with farmers held as hostages. Unable to find money anywhere, the government resorted to having the BAAC extend the debt-repayment period for all farmers by six months without any mention of the interest cost incurred.

It was right for her to say that there was no corruption at the policy level, as this is supposed to be a good measure to boost farmers' income. However, poor and corruption-prone management cancelled out all the possible benefits.

Politicising this issue will hurt not only the government but also the farmers and the country. We can blame the "Thaksin regime" for all the madness, but we also have ourselves to blame, as this is a result of our tolerance of an inefficient checks-and-balances system.

The only good lesson learned from this is that a political party should not sell any unsustainable policy. All parties should be sincere in solving problems and should stop dragging this into a political ball game. We need to admit that the policy was well meant to raise the income of poor farmers. The real problem lies with the corruption-riddled implementation, which should have been prevented by an effective surveillance system.

It is the most needed thing, as corruption cannot be easily wiped out just by ousting the "Thaksin regime".


-- The Nation 2014-02-19

[Red Snake]

The rice scheme must stop now. Let see how the farmers like them apples

[telecom]

We need to admit that the policy was well meant to raise the income of poor farmers.

Goes to show they don't even realise that this was for vote buying at incredible expense to taxpayers.

The promise of 15,000 a tonne year in and year out has driven many farmers into huge debts, and now are unable to repay, even if the scheme continued it would be drawn down to such a level they can still struggle pay debts based on a 15K/tonne income.

Also recommending to release all the stockpiles for sale at a highly reduced rate is just as dangerous to the entire 4.5 million rice farming families when come September their rice is only worth about 4000 baht a tonne and they are losing money, if they can sell it at all.

So come the next harvest, the farmers will be demanding subsidies that the government won't be able to cover, unless it is happy to continue with losses as massive as they are.

The next harvest won't be limited to 1.4 million farmers, it will affect the lot of them.

You get what you vote for.

[Barney R]

What a disaster ,I feel for the farmers and families . I fear the real impact will be in 12 months time or longer remember the government has nearly 18 million tonnes of rice to sell with more coming in every month and other countries have ramped up their production if they try to dump this rice on the open market prices will tumble dramatically if they keep the rice in storage it degrades slowly a catch 22 situation . If you think things are bad now from first hand experience in Australia when the wool market collapsed things will be twice as bad in 12 months time .

[ChrisY1]

The pledged price of rice, even though higher than market, to my mind is not so bad......it's a rural subsidy which many countries apply to the farming industry.

Managed properly, it possibly could have been sustainable and actually benefited the rural folk.

The faults of the scheme has been in the management....there hasn't been any which is abundantly clear!

Warning signs and genuine advice were ignored, and the graft spiralled out of control until it got the the state it is now at.

Politicians should never be allowed to manage any form of state enterprise.

Thai Air is another glaring example about to fall victim to the same management principles.

[timewilltell]

An ignorant policy with corruption as its aim. This was never a policy aimed at helping the POOR farmers, many of whom are too small to participate, but a policy to benefit big farmers, millers, warehousemen, money lenders and the middlemen as well as huge corruption for the perpetrators of the policy.

If they wanted to help poor farmers this was never the way to do it. Pheu Thai are traitors to Thailand and should be treated as such.

Shame also on the Democrats whose myopic policies have still not been thought through to provide a balance which include every sector of society. History will show the huge opportunity they have wasted here because of their own selfish ideas.

As for Yingluck and her team running around trying to lay the blame at everyone's feet except her own where the responsibility actually lies, it is sad the average Thai cannot see the wood for the trees and soak up the wrapping paper around the pile of Doo Doo that is PT.

And now Yingluck is after forcing the AOT to deposit funds to cover what her corruption has lost for Thailand and screw the shareholders much like the attempt to get the GSB to bail her out, my goodness isn't it all so obvious?

[chainarong]

This is what happens when you try to buy votes without any risk assessment or knowledge of the market place, a knee jerk scheme, relying on a whim and a prayer, the only thing good that could be said about this scheme is that it has created a Death Wish for the PTP Administration, bad management has no place in politics with peoples money or in this case no money , both sides only have themselves to blame ,however pressure would have been applied for farmers to except this shonky scheme and of course they are the losers at this point, if it sounds to good to be true , it probably isn't true.

[whybother]

An ignorant policy with corruption as its aim. This was never a policy aimed at helping the POOR farmers, many of whom are too small to participate, but a policy to benefit big farmers, millers, warehousemen, money lenders and the middlemen as well as huge corruption for the perpetrators of the policy.

If they wanted to help poor farmers this was never the way to do it. Pheu Thai are traitors to Thailand and should be treated as such.

Shame also on the Democrats whose myopic policies have still not been thought through to provide a balance which include every sector of society. History will show the huge opportunity they have wasted here because of their own selfish ideas.

As for Yingluck and her team running around trying to lay the blame at everyone's feet except her own where the responsibility actually lies, it is sad the average Thai cannot see the wood for the trees and soak up the wrapping paper around the pile of Doo Doo that is PT.

And now Yingluck is after forcing the AOT to deposit funds to cover what her corruption has lost for Thailand and screw the shareholders much like the attempt to get the GSB to bail her out, my goodness isn't it all so obvious?

"Shame also on the Democrats whose myopic policies"

I'm just wondering what the Democrat's "myopic" polices were? They had a rice policy that went directly to the farmer and didn't get syphoned off by the millers and middle men. In a survey in the north, the Democrat policies were actually preferred. What other "selfish" ideas did they have?

[Robby nz]

Around here the paddy is mostly in the seed head stage (rice grain) and will be due for harvest I would think in the next month.

Some has already been harvested and as I get around the small sois between the paddy I wonder what is going to happen to all these tons of rice when they are harvested.

I would think the farmers are going to be very reluctant to entrust any to the pledging scheme again and they certainly cant keep the stuff so I guess it only leaves selling privately to the millers or traders for whatever they can get, which could well leave them in a loss situation, still they will have some money on hand hopefully enough to pay off any debts and keep them going. But going till when and to what ?

The new seasons rice being sold privately will mean that the Govt trying to sell the stockpiles will be in direct competition with the farmers, lowering prices even farther.

[Robby nz]

An ignorant policy with corruption as its aim. This was never a policy aimed at helping the POOR farmers, many of whom are too small to participate, but a policy to benefit big farmers, millers, warehousemen, money lenders and the middlemen as well as huge corruption for the perpetrators of the policy.

If they wanted to help poor farmers this was never the way to do it. Pheu Thai are traitors to Thailand and should be treated as such.

Shame also on the Democrats whose myopic policies have still not been thought through to provide a balance which include every sector of society. History will show the huge opportunity they have wasted here because of their own selfish ideas.

As for Yingluck and her team running around trying to lay the blame at everyone's feet except her own where the responsibility actually lies, it is sad the average Thai cannot see the wood for the trees and soak up the wrapping paper around the pile of Doo Doo that is PT.

And now Yingluck is after forcing the AOT to deposit funds to cover what her corruption has lost for Thailand and screw the shareholders much like the attempt to get the GSB to bail her out, my goodness isn't it all so obvious?

"Shame also on the Democrats whose myopic policies"

I'm just wondering what the Democrat's "myopic" polices were? They had a rice policy that went directly to the farmer and didn't get syphoned off by the millers and middle men. In a survey in the north, the Democrat policies were actually preferred. What other "selfish" ideas did they have?

I was wondering that to and as the poster seems to have inside knowledge of the Dems policies it would be great if he/she could detail them because I for one really would like to know.

To the best of my knowledge nothing has been announced publicly and to my way of thinking it is about time they, and all parties put their cards on the table and told the country just what they would do.

Far to much ; he did, she did, they did and nothing about what any of them would do to fix things.

[noikrit]

Quote

"Rice-pledging scheme: a death trap for govt and farmers"

But NOT for the ones involved with syphoning off all that Rice Scam Money !!! ............. Now ... Where is that Money ???? ...

[Suriya4]

Just return the rice to the farmers, plus a little interest.

Problem solved.

[Crushdepth]

The rice scheme must stop now. Let see how the farmers like them apples

It does need to stop before more damage is done. Readjusting will already be difficult, since rice prices are now lower than when the scheme started and there's a massive stockpile to deal with which isn't going to help.

There are much better, sustainable ways to support farmers.

Sent from my Nexus 5 using Thaivisa Connect Thailand mobile app

Edited February 19, 2014 by Crushdepth

[Suriya4]

The rice scheme must stop now. Let see how the farmers like them apples

It does need to stop before more damage is done. Readjusting will already be difficult, since rice prices are now lower than when the scheme started and there's a massive stockpile to deal with which isn't going to help.

There are much better, sustainable ways to support farmers.

Sent from my Nexus 5 using Thaivisa Connect Thailand mobile app

Yes, but not with Bangkokian tax payers money.

Please raise the fund locally.

[boomerangutang]

Should have let the fluctuations of the market dictate prices. Millers are already rich (Chinese-Thai) and reaped much of the rice money given away. If the gov't wanted to supplement the meager income of rice farmers, then give them some sort of hand-out or coupon (like food stamps). Rice is just one crop in Thailand. Rice farmers were targeted because there are more of them than farmers of other individual crops, and therefore = more votes.

Rice is labor intensive, doesn't pay as well as other crops, and is marginally nutritious (it's about 99% starch). There are a slew of crops which pay better and are healthier - and which would grow v. well in Thailand.

[kingalfred]

An ignorant policy with corruption as its aim. This was never a policy aimed at helping the POOR farmers, many of whom are too small to participate, but a policy to benefit big farmers, millers, warehousemen, money lenders and the middlemen as well as huge corruption for the perpetrators of the policy.

If they wanted to help poor farmers this was never the way to do it. Pheu Thai are traitors to Thailand and should be treated as such.

Shame also on the Democrats whose myopic policies have still not been thought through to provide a balance which include every sector of society. History will show the huge opportunity they have wasted here because of their own selfish ideas.

As for Yingluck and her team running around trying to lay the blame at everyone's feet except her own where the responsibility actually lies, it is sad the average Thai cannot see the wood for the trees and soak up the wrapping paper around the pile of Doo Doo that is PT.

And now Yingluck is after forcing the AOT to deposit funds to cover what her corruption has lost for Thailand and screw the shareholders much like the attempt to get the GSB to bail her out, my goodness isn't it all so obvious?

the saddest part of all is that so many of the masses in the north east have such poor education and are easy pickings for Yingluck and the PT politicians who claim to love them so much.

Sent from my iPhone using Thaivisa Connect Thailand mobile app

[Griffo63]

What a pathetic group the Democrats are appearing to be. There is nothing coming forward from them about what they would be doing now if they were in power. The country is in disarray, support for the Pheu Thai Party is at its lowest level in the provinces but the Democrats are quiet. Why? if they want to win an election at some time in the future then they'll need to win in the North.

Why are they so quiet?

[taff33]

The rice scheme must stop now. Let see how the farmers like them apples

It does need to stop before more damage is done. Readjusting will already be difficult, since rice prices are now lower than when the scheme started and there's a massive stockpile to deal with which isn't going to help.

There are much better, sustainable ways to support farmers.

Sent from my Nexus 5 using Thaivisa Connect Thailand mobile app

Yes, but not with Bangkokian tax payers money.

Please raise the fund locally.

Why is it that only 'bangkokian's'pay tax?.Why should rice farmers be payed a pittance for thier rice while the middle men make all the profit?why do they need middle men let them sell direct.

Edited February 19, 2014 by taff33

[pedro01]

Around here the paddy is mostly in the seed head stage (rice grain) and will be due for harvest I would think in the next month.

Some has already been harvested and as I get around the small sois between the paddy I wonder what is going to happen to all these tons of rice when they are harvested.

I would think the farmers are going to be very reluctant to entrust any to the pledging scheme again and they certainly cant keep the stuff so I guess it only leaves selling privately to the millers or traders for whatever they can get, which could well leave them in a loss situation, still they will have some money on hand hopefully enough to pay off any debts and keep them going. But going till when and to what ?

The new seasons rice being sold privately will mean that the Govt trying to sell the stockpiles will be in direct competition with the farmers, lowering prices even farther.

Indeed - they are in a tough position because they were gouged by suppliers/landlords knowing they'd get a higher price for their rice.

Costs increased but now it looks as if the actual revenue will be way below expectations.

Very tough indeed.

[Mosha]

An ignorant policy with corruption as its aim. This was never a policy aimed at helping the POOR farmers, many of whom are too small to participate, but a policy to benefit big farmers, millers, warehousemen, money lenders and the middlemen as well as huge corruption for the perpetrators of the policy.

If they wanted to help poor farmers this was never the way to do it. Pheu Thai are traitors to Thailand and should be treated as such.

Shame also on the Democrats whose myopic policies have still not been thought through to provide a balance which include every sector of society. History will show the huge opportunity they have wasted here because of their own selfish ideas.

As for Yingluck and her team running around trying to lay the blame at everyone's feet except her own where the responsibility actually lies, it is sad the average Thai cannot see the wood for the trees and soak up the wrapping paper around the pile of Doo Doo that is PT.

And now Yingluck is after forcing the AOT to deposit funds to cover what her corruption has lost for Thailand and screw the shareholders much like the attempt to get the GSB to bail her out, my goodness isn't it all so obvious?

"Shame also on the Democrats whose myopic policies"

I'm just wondering what the Democrat's "myopic" polices were? They had a rice policy that went directly to the farmer and didn't get syphoned off by the millers and middle men. In a survey in the north, the Democrat policies were actually preferred. What other "selfish" ideas did they have?

Free basic medical care, lower food price inflation., etc....

Edited February 19, 2014 by Mosha

[Patpending]

I see this government problem as a problem that won't go away with a new regime. Surely the Government is a state mechanism and has to function with PT/Dems or anybody else for that matter.

Will the farmers problems go away anytime soon. I hope so, but i cannot see it.

[smileydude]

If the rice-pledging scheme was meant as true subsidies to assist farmers financially until they were efficient enough to increase their harvest yield/acre productivity enough to compete with advanced agricultural countries I'm all for it.

Japan is well known to subsidize its agricultural industry because due to the weather and landscape they can only harvest once or twice a year. Most Thai harvests can be done 3 times a year but if farmers become complacent on free hand outs and do not try to improve the quality and quantity of yields through efficient farming techniques they will in the long run lose out especially with the emerging AEC markets and FTA's on their heels.

The NACC has already pressed charges against Yingluck for neglect of duty and is considering an impeachment case. She is due to be summoned on Feb. 27th.

Edited February 19, 2014 by smileydude

[Stradavarius37]

When the farmers rise up and turn on PTP - then we will have real change - until then, it is just marking time...

[rickirs]

The Government "planned to cut the price or reduce the pledging volume, only to face opposition even from the Democrat Party. Even though the Democrats hated the policy, they said the Pheu Thai Party must not change it for the sake of farmers."

If there are charges of corruption, shouldn't they also be applied against the Democrats who were complicit and participatory in the rice program going forward unaltered?

[Robby nz]

The Government "planned to cut the price or reduce the pledging volume, only to face opposition even from the Democrat Party. Even though the Democrats hated the policy, they said the Pheu Thai Party must not change it for the sake of farmers."

If there are charges of corruption, shouldn't they also be applied against the Democrats who were complicit and participatory in the rice program going forward unaltered?

NO

They had no part in the implementing of the scheme and were laughed at when they exposed corruption in the scheme in 2 censure debates.

They were even threatened with trespass when a Dem MP produced and opened a sack of rotten rice in the house.

They did what they could as a minority opposition and were ignored.

[rickirs]

The pledged price of rice, even though higher than market, to my mind is not so bad......it's a rural subsidy which many countries apply to the farming industry.

Managed properly, it possibly could have been sustainable and actually benefited the rural folk.

The faults of the scheme has been in the management....there hasn't been any which is abundantly clear!

Warning signs and genuine advice were ignored, and the graft spiralled out of control until it got the the state it is now at.

Politicians should never be allowed to manage any form of state enterprise.

Thai Air is another glaring example about to fall victim to the same management principles.

Warning signs were not ignored. The PTP did consider changing the program but the Democrats objected. Now the Democrats hypocritically insist the fault of the program lies entirely with the PTP government. I have never seen a government overthorwn for making bad decisions, sure such government become vulnerable in the next elections against charges of inefficiency. But in Thailand the accusation of corruption seems to be a convenient catch-all for everything politicians oppose.

[Robby nz]

The pledged price of rice, even though higher than market, to my mind is not so bad......it's a rural subsidy which many countries apply to the farming industry.

Managed properly, it possibly could have been sustainable and actually benefited the rural folk.

The faults of the scheme has been in the management....there hasn't been any which is abundantly clear!

Warning signs and genuine advice were ignored, and the graft spiralled out of control until it got the the state it is now at.

Politicians should never be allowed to manage any form of state enterprise.

Thai Air is another glaring example about to fall victim to the same management principles.

Warning signs were not ignored. The PTP did consider changing the program but the Democrats objected. Now the Democrats hypocritically insist the fault of the program lies entirely with the PTP government. I have never seen a government overthorwn for making bad decisions, sure such government become vulnerable in the next elections against charges of inefficiency. But in Thailand the accusation of corruption seems to be a convenient catch-all for everything politicians oppose.

Another load of bull.

The farmers objected, and Yingluck and PT backed down.

[rickirs]

An ignorant policy with corruption as its aim. This was never a policy aimed at helping the POOR farmers, many of whom are too small to participate, but a policy to benefit big farmers, millers, warehousemen, money lenders and the middlemen as well as huge corruption for the perpetrators of the policy.

If they wanted to help poor farmers this was never the way to do it. Pheu Thai are traitors to Thailand and should be treated as such.

Shame also on the Democrats whose myopic policies have still not been thought through to provide a balance which include every sector of society. History will show the huge opportunity they have wasted here because of their own selfish ideas.

As for Yingluck and her team running around trying to lay the blame at everyone's feet except her own where the responsibility actually lies, it is sad the average Thai cannot see the wood for the trees and soak up the wrapping paper around the pile of Doo Doo that is PT.

And now Yingluck is after forcing the AOT to deposit funds to cover what her corruption has lost for Thailand and screw the shareholders much like the attempt to get the GSB to bail her out, my goodness isn't it all so obvious?

So your argument is that the PTP was corrupt by developing a program intended to help Democrat supporters. Yet the Democrats are blaming the government as corrupt for using the rice program as a means to buy poor farmer votes. Seems there has to be some misrepresentations being made about the program with regard to corruption. It's more like, "If it's my corruption, it's okay but if it's your corruption, it's not okay."

[Suriya4]

The pledged price of rice, even though higher than market, to my mind is not so bad......it's a rural subsidy which many countries apply to the farming industry.

Managed properly, it possibly could have been sustainable and actually benefited the rural folk.

The faults of the scheme has been in the management....there hasn't been any which is abundantly clear!

Warning signs and genuine advice were ignored, and the graft spiralled out of control until it got the the state it is now at.

Politicians should never be allowed to manage any form of state enterprise.

Thai Air is another glaring example about to fall victim to the same management principles.

Warning signs were not ignored. The PTP did consider changing the program but the Democrats objected. Now the Democrats hypocritically insist the fault of the program lies entirely with the PTP government. I have never seen a government overthorwn for making bad decisions, sure such government become vulnerable in the next elections against charges of inefficiency. But in Thailand the accusation of corruption seems to be a convenient catch-all for everything politicians oppose.

Democrats objected?

Any proof?

[rickirs]

Around here the paddy is mostly in the seed head stage (rice grain) and will be due for harvest I would think in the next month.

Some has already been harvested and as I get around the small sois between the paddy I wonder what is going to happen to all these tons of rice when they are harvested.

I would think the farmers are going to be very reluctant to entrust any to the pledging scheme again and they certainly cant keep the stuff so I guess it only leaves selling privately to the millers or traders for whatever they can get, which could well leave them in a loss situation, still they will have some money on hand hopefully enough to pay off any debts and keep them going. But going till when and to what ?

The new seasons rice being sold privately will mean that the Govt trying to sell the stockpiles will be in direct competition with the farmers, lowering prices even farther.

Unfortunately for the farmers, Thailand cannot domestically absorb all the current rice stock at any price and must put rice on the international marketplace - farmers are not themselves capable to make bulk international sales. International buyers know there is now a glut of Thailand rice resulting from delays in sales and will take advantage of the glut to drive down the prices even further. To make matters worse, another harvest is on its way. Farmers might be better off to plow under, or whatever is the procedure, current rice production or donate it to the Monks. Regardless of this epic disaster, who is trying to make matters better for the farmers? They need rice sales, not sympathy, not political support, not finger-pointing; those things don't pay bills and feed the family.

Around here the paddy is mostly in the seed head stage (rice grain) and will be due for harvest I would think in the next month.