Sensible movs on pledging by new rice policy panel

The pledging price of Bt12,000 per tonne (in this article, the reference would be made to rice paddy only), is still too high and would cause some financial loss to the government agency when compared with the market price of Bt11,000 to Bt11,500 on October 20.

There is a slim chance for the market price of the rice paddy in the upcoming main crop to increase to Bt12,000 per tonne, taking into consideration the increase in growing area for rice in response to the very high price this year.

Besides, the other producing countries have not experienced natural disasters like last year. As a consequence, this main crop is likely to be a bumper crop, which would put pressure on price of rice paddy.

The rice-pledging programme is necessary to prevent excessive reduction in the price of rice paddy.

However, the proper level of the pledging price, that would effectively prevent the undue decrease in the market price while not creating too much financial loss, is debatable. Under the current situation where the market price is high enough, it is not necessary to set the pledging price higher than market price.

Setting it slightly under the market level, let's say Bt10,000 to Bt11,000 per tonne, should be good enough since such a price well covers the cost of production and should not attract too much stock accumulation for the government agencies that would finally suppress the market price from gradually increasing as is supposed to be.

The decision on the reduced pledging price, which is still higher than the market price, may be a compromise as the former NRP Committee set a much higher price.

It is interesting that the existing NRP Committee has not aimed to take a pledge of as much as 8 million tonnes as approved by the former NRP Committee. Instead, they have introduced a new process under which farmers are required to register the potential amount of their rice output for further pledging after harvest. After the harvest, if the market price is higher that Bt12,000 per tonne, the farmers could sell the rice in the market and not pledge with the agency.

Nevertheless, if the market price is lower than the pledging one, farmers can opt to pledge their rice as previously registered. This process sounds logical and seems to indicate that the amount of rice to be pledged should be less than the total of the registered amount.

In reality, though, where the pledging price is as high as Bt12,000 per tonne, and there is a slightest chance that the market price of the upcoming season could increase to such level, millions of tonnes of rice paddy would naturally be attracted for pledging, and the financial loss that would finally occur would not be minimal. However, this price is still better than the pledging price of Bt14,000 per tonne with a definite plan to push to 8 millions tons. About Bt16,000 million is saved as a consequence of the new scheme approval.

The interesting feature of the resolution of the last NRP Committee meeting is the stipulation to have farmers who want to pledge their rice register the estimated amount of their harvest beforehand with the Bank for Agriculture and Agricultural Cooperative (BAAC). If this condition is strictly implemented, this programme will be of great benefit to real farmers.

BAAC is an organisation with enough information to identify real farmers. If BAAC makes sure that rice-pledging is limited to farmers only, the subsidy provided through the pledging at a price higher than the market price would all fall in the hands of farmers, and not in the hands of rice millers or other middlemen.

How strictly BAAC will take care of this issue depends on the good conscience of BAAC staff.

I am aware that members of the current board of directors are people of good conscience and of national interest. I hope that the board would make sure that their staff offers rice pledging to the farmers only.

Conclusively, the current NRP Committee has taken good care of national interest by reducing the potential loss on rice pledging programme by Bt 16,000 million from the one that was formerly approved by the previous NRP Committee.

However, the pledging price of Bt12,000 per tonne for rice paddy is still higher than the market price, which is not necessary when the market price is high enough as it is now. It might be the will of the government to try to boost the market back to Bt12,000 per tonne with an intention to benefit the farmers.

What is most satisfactory is that the NRP Committee has approved a measure to make sure that only farmers would be allowed to pledge rice with BAAC, ensuring that all government subsidies exclusively benefit farmers.

It all depends on the ability of the BAAC board to oversee that the staff strictly implement according to the stipulated condition.

Until next Monday.