Rice farmers await Council of State

Economy January 24, 2014 00:00

By The Nation

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More than 1 million farmers are expecting money owed for their pledged rice in 30 days at the earliest, when the Council of State is expected to advice whether the caretaker government can legally acquire funds for the rice-pledging scheme.

The Bank for Agriculture and Agricultural Cooperatives (BAAC), meanwhile, is ready to aid the suffering farmers by extending their credit limit.

The Public Debt Management Office yesterday said in a report that after the Cabinet approved seeking an additional loan of Bt130 billion to pay for the pledged rice for the 2013-14 harvest, the Office had submitted a letter to the Council of State seeking their advice on the matter.

"The Office sent the letter to the Council of State for deliberation because of the huge amount of money involved. We expect to hear from the council in 30 days," the Office report said.

After receiving the advice, the Office would begin borrowing from financial institutions Bt10 billion a week in the form of loans and bonds, according to the report.

BAAC executive vice president Songserm Saksit said yesterday that the bank’s board had agreed to launch measures to mitigate the suffering of farmers numbering some 1.4 million people who have not been paid their dues.

Initially, the BAAC board eased the requirement for lending to farmers through extension of the credit limit to 80 per cent from 20 per cent of the value of the farmers’ pledge invoices; decrease in interest rate to 3-5 per cent from 7 per cent annually. However, the loan limit will take into account the market price, not the pledged price [Bt15,000 per tonne]. In addition, the bank would reschedule the loan repayments due in March, by extending the due date by another six to 12 months without charging the penalty rate of 3 per cent per annum. Hundreds of thousands of farmers have to make loan repayments.

Meanwhile, the caretaker government would rush to provide the council additional information after receiving a written recommendation from the Election Commission, said Agriculture and Cooperatives deputy minister Varathep Ratanakorn.

Section 181 of the Constitution bans a caretaker government from making any decisions that could impose a financial burden on the next government. The government is required to ask for permission from the EC. However, the EC on Tuesday rejected a government request to acquire an additional Bt130-billion loan to fund the rice-pledging scheme.

Under the scheme, the government needs at least Bt130 billion more to pay for the pledged rice in the 2013-14 harvest season, of which about 10.41 million tonnes (worth Bt167 billion) of paddy rice are expected to gradually enter the project. The government has so far paid Bt50 billion to farmers and needed more money for farmers who had not yet been paid. BAAC projected that the value of the pledged rice may reach Bt190 billion.