Rice-pledging scheme taking a toll on budget

Funds from fiscal 2014-16 may need to be appropriated to cover Bt100-bn loss

The government's rice-pledging scheme is taking a toll on Thailand's tightly squeezed budget, as some of the funds from fiscal years 2014-16 might be required to offset the Bt100-billion loss.

The subcommittee given the task of concluding the rice-pledging scheme submitted a proposal yesterday along with some recommendations to prevent further losses from the scheme, a source who chose to remain anonymous, said.

The proposal comes at a time when the Bank for Agriculture and Agricultural Cooperatives (BAAC) is seeking more funds to continue with the scheme and stockpiles are rising amid falling rice prices in the global market. Economists, including Prime Minister Yingluck Shinawatra's adviser Virabongsa Ramangkura and the Thailand Development Research Institute's Ammar Siamwalla, have warned the government of the unsustainability of this allegedly graft-ridden project and its burden on the country's budget. The World Bank had earlier estimated that in the first year, the scheme would cost the country Bt115 billion out of its budget of Bt376 billion.

According to the source, the Bt100 billion would be used to repay most of the Bt117.796 billion borrowed to finance the pledging of rice in the 2011-2012 production year.

The loans' accumulated interest has reached Bt6.82 billion.

"With some money from the annual expenditures allocated for the debt repayment, the Bt100-billion loan would be written off. If buyers for the stockpiled rice can be found, the proceeds will be used to repay the remaining principal," the source said.

Assuming the losses in the budget balance sheet would mean the government would have less funds to spend on necessary projects. For fiscal 2014, the Cabinet had recently approved Bt2.5 trillion expenditure against Bt2.27 trillion in revenue, resulting in a deficit of Bt250 billion. Under the subcommittee's proposal for the government to repay Bt63 billion of the loans taken for rice in the fiscal year, the budget deficit is bound to increase or the government will have to cut expenditure on other projects by a similar sum.

Proposal before cabinet

The proposal from the subcommittee, chaired by Finance Ministry deputy permanent secretary Supa Piyajitti, is yet to win the Cabinet approval.

The pledging scheme for in-season rice in 2011-12 production saw the total principal at Bt117.796 billion with interest rising to Bt6.82 billion.

The first tranche of payment in fiscal 2014 will be Bt58.90 billion towards the principal and Bt4.01 billion towards interest. The second tranche (fiscal 2015) will consist of Bt35.34 billion for the principal and Bt2.01 billion interest. The third (fiscal 2016) will consist of Bt23.56 billion principal and Bt802.43 million interest.

After five subcommittee meetings, additional measures were proposed to ensure more efficiency in agriculture product-pledging schemes and to prevent risks that may arise.

Some measures include an official registration of farmers for actual plantation areas and production, a survey of at least 20 per cent of all actual farming areas that are registered and stringent controls on rice milling and rice delivery.

The source said that of the total approved borrowings amounting to Bt269.16 billion for agricultural product-pledging schemes in the 2011-12 production period, the government had borrowed Bt215.75 billion during fiscal 2012.

The government has also set plans for borrowing Bt53.41 million to cover the second crop of rice, which began to hit the market early this year.

Of the total planned borrowings, about Bt49.57 million have already been utilised. In the 2012-13 production period, the government has made plans to borrow Bt140.84 billion in fiscal 2013.