TDRI exposes flaws of pledging

In the letter, it said the government’s price-subsidy programme had created a huge impact on the Thai rice industry and the country’s debt situation. Despite the existence of corruption in the pledging process, the government has insisted on going ahead with the programme, claiming it is a good policy.

ONLY TWO POSITIVE FEATURES
The TDRI, one of the country’s key watchdog agencies, pointed to two positive outcomes of the policy. First, farmers registering under the programme gain from the price gap between the pledging and market prices, totalling Bt72.71 billion. Of this total, the main rice crop accounts for Bt25.653 billion and the second crop the rest. Second, farmers outside the project enjoy increased market prices, which go up in line with the government’s high subsidy price. It is predicted that production in this segment reached 7 million tonnes of paddy rice.

NEGATIVE POINTS
TDRI said there were 3.8 million to 4 million farmer households but the price-subsidy scheme covered only 900,000 households. Moreover, this programme benefited mainly high-to-middle-income farmers rather than poor farmers. The institute’s figures showed that farmers under this programme generated revenue of Bt600,000 each, accounting for 5.4 per cent of registered farmers for second-crop production.
On the other hand, poor farmers who grow rice for their own consumption get nothing from the pledging scheme, as 740,000 households of farmers still purchased rice.
“Thais have a misunderstanding that farmers are a poor section of the population, but they are a group classified as a middle-income group, which also enjoys the government’s high pledging prices. This means the price-pledging scheme is distributing tax collected from citizens, including poor people, to give to high- and middle-income farmers,” the report said.
The government has to spend a huge budget of Bt300 billion to finance the pledging programme for rice production. In addition, it has to spend Bt20.644 billion for rice mills to process the paddy rice, maintain quality including the hiring of inspectors, and cover Bt5.516 billion in interest and other expenses. Moreover, it has to support expenses of Bt5.946 billion for official management and losses of Bt5.532 billion due to rice degradation.
The price-subsidy programme has caused the biggest increase in government spending and corruption involving farmers, rice millers and politicians, the TDRI charges.

BAD POLICY
As a result of what on balance is a bad policy, Thailand has lost its standing as the world’s biggest rice exporter to India, and dropped to third place this month behind Vietnam, the letter said. Also, Thailand is losing markets for the prestigious jasmine rice as well as high-quality parboiled rice.
The most serious development of the price-pledging scheme is that it is damaging the market mechanism and competition among rice traders by monopolising almost all rice production and trading through government management. Only exporters who have political backing will benefit from the government’s rice stockpile.
“Throughout the one year of the policy’s implementation, it has turned Thailand from a high-quality rice-growing country to a low-quality one, as the government has not purchased rice based on quality,” the letter said.
It also warned that if the government did not want to increase its public debt, it needed to sell all of its rice stockpiles to ensure working capital for the programme year after year.