No way seems feasible for caretaker govt to pay rice farmers their dues

Economy February 10, 2014 00:00


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NO MATTER what the government does to solve the problem of its overdue payments to farmers, it seems the rice-pledging project may face a dead-end due to its high cost and low likelihood of being able to sell enough rice quickly to cover its obligations.

Some academics and farmers suggest that the best solution is for the current caretaker government to resign so that the pledging scheme can be cancelled and give a new government full authority to borrow money or seek other methods to pay the farmers promptly. Normally this would be taken care of through a democratic election, but the current political impasse has seriously delayed that process.
Caretaker Commerce Minister Niwatthumrong Boonsongpaisan said the government still had the ability to pay farmers by accelerating rice sales, which should be able to bring in Bt10 billion this month. But even if he is correct, that would not be nearly enough to pay farmers the arrears of more than Bt120 billion for 7 million tonnes of rice. Through sales alone, the government would need 12 months to raise enough to get the payments up to date.
Meanwhile, it has not yet been able to borrow to cover the shortfall, as its caretaker status entails major restrictions on fund-raising. None of the country’s banks, either state-owned or commercial, will participate, as they need to avoid legal entanglements, maintain financial stability, and keep the trust of other clients.
According to the Bank for Agriculture and Agricultural Cooperatives (BAAC), as of February 5, the bank had paid 472,672 farmers under the pledging project Bt59.51 billion for 3.7 million tonnes of rice. The government still needs to pay Bt120 billion for a further 7 million tonnes.
“The caretaker administration is a ‘failed government’. The only solution to unlock the rice-pledging project is to resign and let a new government to solve the problem,” said Pridiyathorn Devakula, who was briefly a deputy prime minister in Surayud Chulanont’s interim regime following the military overthrow of Thaksin Shinawatra.
The current government of Thaksin’s sister Yingluck Shinawatra has said it might borrow from overseas banks to pay the suffering farmers. But Article 181 of the Constitution prohibits a caretaker government from any activities that would commit a new government to maintaining them. 
It faces a similar problem if the farmers take interim loans from millers or the BAAC, as it would have difficulty paying back such loans and interest.
Aat Pisanwanich, director of the Centre for International Trade Studies, said the only way to fund the project was to sell the government’s warehoused rice as soon as possible at a low price. It may need to unload it at US$350 a tonne for 5 per cent white rice, while the market price is about $400 a tonne.
“To sell rice is probably the best solution. But it would not easily get the money immediately, while there is limited demand in the world market,” he said.
He said the government needed to accept the fact that it would face a huge loss from selling off its rice stockpile. But even if it did, it would risk dumping charges brought by rival rice exporters to the World Trade Organisation. Thailand’s release of huge stocks would inevitably drive down the rice price in the world market.
A source from the Thai Rice Millers Association said millers were hesitant whether to join the government’s project in providing soft loans to farmers as they also were bearing a huge financial burden for keeping rice in stockpiles.
“Millers have also faced liquidity problems. We are not sure whether or when the government will have the ability to pay our interest, or when farmers would be able to pay the principal to us,” the source said.
Prasith Boonchuey, president of the Thai Rice Farmers Association, said the government needed to end its caretaker administration quickly if it is concerned about farmers. 
“The caretaker government cannot do much to solve the overdue payment [problem]. Farmers are now suffering from debts, and have no money to cover their daily expenses,” Prasith said.
According to news reports, four farmers have committed suicide after they could not get money owed them under the pledging scheme.
Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said the government had already secretly sold rice at the low price of about Bt11,000 a tonne. Rice exporters are interested in buying rice from the government as most of the country’s crop is going into the pledging project. Farmers want the high returns guaranteed by the government under the programme. But in the end, the government needs to release rice at a low price. 
He also called for the government to ensure transparency and fairness by allowing all rice traders to join the auctions.
Those are some suggestions by concerned parties affected by the pledging scheme. Yingluck needs to make a decision and think more about the country’s many farmer households, as they are really suffering from a lack of income, while the powerful anti-government movement continues to hold back the democratic process that could put a permanent administration in place quickly.