Rice-pledging scheme: BAAC lacks liquidity for ample stockpile

The bank has liquidity of only Bt90 billion, which could only help the government build a stockpile of 6 million tonnes. But the rice crop will amount to about 25 million tonnes, and the government has promised to buy it all from farmers to boost the price to Bt15,000 per tonne.

The government will start the scheme on October 7.

Luck said he had consulted with the Finance Ministry on the first loans of Bt100 billion. The other three state banks - Government Savings Bank, Krung Thai Bank and TMB Bank - will join in the syndicated loans.

More loans will be needed if the price of rice does not reach target.

The Commerce Ministry will operate the scheme while the bank will only provide financing, he said.

The government owes the BAAC about Bt140 billion for previous subsidy projects but is expected to compensate the bank only Bt36 billion in the next fiscal year, Luck said.

The Commerce Ministry recently allowed blacklisted millers to participate in the pledging scheme, which sparked fears of widespread corruption.

Critics of the programme predict that taxpayers will have to foot the huge bill of the subsidies while consumers pay more for white rice. Meanwhile rice exporters such as Vietnam with lower prices will gain much of the global market share.

Meanwhile, the government insists that its policy to shore up rice prices will not create special privileges for specific groups of traders or exporters.

"The price-pledging scheme is not the government's measure to pull up rice prices for anybody," Commerce Minister Kittiratt Na-Ranong said yesterday.

The meeting of the National Rice Policy Committee today will come up with clear conditions so that the pledging project can proceed, he said.

The government aims to subsidise the production of an estimated 25 million tonnes of paddy rice this season.

It will closely monitor rice prices to ensure the subsidy will reflect real production costs.

The government will also find ways to prevent any possible losses from the project by inviting government agencies and surveyors to join in the meetings, Kittiratt said.

To maintain the quality of the rice kept in warehouses, the government will closely supervise all rice flowing into supplies from harvesting, polishing and stocking.

It will also rush to find a way to release its stocks to keep quality high for government rice rather than store it for lengthy periods.

The Public Warehouse Organisation will play a big role in producing cheaper packaged rice, which will help alleviate the high cost of living for consumers.

The Commerce Ministry will contact buyers to persuade them to accept the higher prices of Thai rice under the programme.

"The scheme is designed to ensure that farmers can sell their rice at a fair price, particularly since their costs will rise from the increase of the minimum daily wage to Bt300 and minimum salary to Bt15,000," he said.