Farmers face 'liability crisis' despite govt aid
Despite government programmes such as the farmers' credit-card and price-pledging schemes, farmers are still seeing their debt loads gradually increase. Each farm household will be carrying a debt of Bt110,000 on average by the end of this year, the high
According to the study by the University of the Thai Chamber of Commerce (UTCC), farmers are facing higher liabilities due mainly to skyrocketing costs of production. In addition, farmers have accelerated production to benefit from government subsidies. Thanavath Phonvichai, director of the UTCC’s Economic and Business Forecasting Centre, said the debt burden of farmers was expected to reach an average Bt110,000 per household this year.
"The government’s farm policy has only focused on driving crop prices while failing to focus on reducing production costs, which is a serious problem for farmers. Despite higher pledging prices, most farmers feel that their incomes have been unchanged because the costs of production have risen greatly," Thanavath said.
He stressed that the farm sector was getting trapped in a critical situation in terms of liabilities. Farmers have to borrow more to expand their plantation areas because they want more output and expect higher incomes from subsidised government projects. However, with production costs rising, they are facing higher debt burdens.
Last year, the average farm debt per family was Bt103,047, which was up by 6.6 per cent from 2010’s figure.
Farmers will this year turn more to informal loans, accounting for more than 40 per cent of overall loan value, Thanavath said. This could create more problems for them in the future. Last year, 39.1 per cent of farmers borrowed from underground lenders.
The poll of 1,211 respondents indicates that farmers have turned to loan sharks because of faster approval, while some farmers do not have mortgage securities or lack information.
However, the UTCC expects that the debt problem could be reduced if the government’s credit-card scheme is successful in helping farmers purchase raw materials and does not lead to overspending. But the government must ensure that the credit cards are paid up as soon as farmers receive income from selling their crops, or bad loans could result, the UTCC warned.
Thanavath said the government should also examine how much it is spending on agricultural subsidy, now amounting to more than Bt250 billion a year.
After being in effect for only a year, it is not yet clear whether the pledging policy has benefited farmers and agricultural trading. However, the government is entering the second year of the scheme, and the combined spending of Bt500 billion over two years may be useless if the government only focuses on shoring up crop prices while failing to promote agricultural trade and sustainable development, such as expanding irrigation.
Wachara Kuntaweethep, a lecturer at the centre, said almost 60 per cent of farmers expected their incomes to be unchanged this year, 26 per cent expected lower incomes, and 14 per cent hoped to gain more income for their crops. The survey also showed that farmers were mostly concerned about lower crop prices, rising prices of fertiliser and pesticide, higher debt, and rising fuel prices.
