Most farmers want long-term rice subsidy, but UTCC cites high costs.

The UTCC yesterday released the results of a survey titled "Government Policy on Price Pledging and Price Guarantees and Ways to Ease Farmers’ Debt". Although 86.5 per cent of the 1,200 respondents believe the government should make either the current pledging system or a price guarantee scheme a long-term strategy, the university said doing so would be too costly.

Despite its perceived short-term benefits, it argues, there are negative outcomes from the pledging scheme. It is racking up losses of Bt9,000 per tonne from the total pledging volume of 9 million to 10 million tonnes, and the cost of carrying on the programme will hit the national budget to the tune of Bt100 billion per year. With this subsidy burden together with impacts from other populist policies, the Kingdom’s public debt could increase to 50-60 per cent of gross domestic product.

Although farmers favour the pledging subsidy, their debt has still increased by 11 per cent year on year to Bt114,378 per household, according to the UTCC.

Thanavath Phonvichai, director of the university’s Economic and Business Forecasting Centre, said that of the total survey respondents, 35.4 per cent were satisfied with the pledging programme, reasoning that they enjoyed higher price, and easy and quick receipt of their money.

However, 28.2 per cent preferred a price-guarantee programme, saying it created high prices and the government spent less than on the pledging policy. The most important thing is it would not distort the market price, which was important for sustainable development.

"Farmers in the survey don’t want the government to cancel the pledging policy now but many said it should be dropped after rice prices have increased, or production costs reduced. Price subsidy should stop when the regional market comes under the Asean Economic Community," Thanavath said, noting that Thai farmers were worried that they might not be able to compete with rice from neighbouring countries.

He added that the pledging policy had increased the incomes of Thai farmers significantly. In addition, it enhances the country’s economy through higher liquidity by 2-2.5 times.

"Without any corruption in the scheme, higher income of farmers would help them clear all debts within three years," Thanavath said.

Thai rice exporters have expressed concern over corruption, which the UTCC says will cause an estimated loss of Bt100 billion to Bt120 billion (including management costs). This would directly affect the country’s public debt and economic growth, the penalties for which are currently being played out in Greece.

Thai farmers’ debt was reported by the university to have increased by 11 per cent to Bt114,378 this year. Of the total debt, 59.1 per cent has been borrowed for banks and the remainder from loan sharks. The UTCC forecasts that household debt of farmers will increase by 3-5 per cent next year, deriving from higher production costs. Farmers also have to face higher living costs and land prices to expand their plantation areas.

Respondents to the survey agreed that the government should allocate some of its budget to conduct a study on the pros and cons of the price-pledging scheme and find ways to reduce farmers’ accumulated debt. In addition, they need to see the government spend more on irrigation-system development.

Meanwhile, the Commerce Ministry is planning to open bidding on the government’s jasmine-rice stockpile totalling 586,000 tonnes next Wednesday.

The bidding lot will involve 100-per-cent jasmine rice B grade, provincial jasmine rice, Pathum Thani rice, 10-per-cent sticky rice, broken jasmine rice and broken Pathum Thani rice.

The rice stock is part of the leftover volume from the latest auction on August 28, which opened bidding for a total of 499,000 tonnes of jasmine rice. However, only 20,000 tonnes of rice was sold.