Price-pledging fiasco

Governments linked to former prime minister Thaksin Shinawatra have inflicted cumulative losses of almost Bt400 billion on the country through the pledging schemes for rice and other farm crops, and the current government is responsible for a loss of up to Bt260 billion as at the end of May.

The Finance Ministry’s Post-Audit Committee on the Rice Pledging Scheme revealed yesterday that the government of Prime Minister Yingluck Shinawatra had overspent the budget for the rice-pledging project – Bt661.22 billion, well in excess of the Bt500 billion earmarked for the project.

The panel urged the government to release its rice stockpiles soon to bring revenue into the project.

Meanwhile, the Public Warehouses Organisation (PWO) said yesterday that it would ask the government for an additional Bt2 billion to stock more than 15 million tonnes of rice left in the government’s stockpiles from the pledging during the past two years. The PWO stores more than 70 per cent of the government’s rice, while the rest is being held by the Marketing Organisation for Farmers.

The Democrat coalition led by Abhisit Vejjajiva came to power in late 2008. During its time in power, the government abandoned the pledging scheme and adopted a crop-price-insurance policy, which freed the government from the responsibility of stocking the crops. 

The Finance Ministry committee reported that as of January 31 this year, the government faced a loss of Bt220.96 billion. The government is estimated to be accumulating a loss of Bt10 billion a month under the pledging scheme – a cumulative loss of Bt260 billion by the end of May.

Of the total losses, Bt42.96 billion is for the main crop in 2011-12, Bt93.93 billion from the second crop in 2012, and Bt84.07 billion from the main crop in 2012-13.

The losses do not take into account depreciation of rice quality in the government stockpiles, which if included, could take the total loss to more than Bt400 billion, the report said.

If the budgets for the pledging schemes for rice and other crops under all the Thaksin-related governments are tallied, the country’s losses from the subsidy projects would amount to Bt393.9 billion. These amounts include rice-pledging losses during 2008-09. 

The committee said the huge losses from the pledging had resulted from the Commerce Ministry’s failure to achieve its target of releasing rice from the stockpiles and the low selling price.

“The government needs to solve the problem urgently, as its rice-selling plan has not been successful because of the low price. The government has overspent the budget and it will affect the next pledging round,” the committee suggested.

PWO vice president Somsak Vongvattanasan said the organisation was currently holding in its stockpiles about 17 million to 18 million tonnes of rice from the pledging scheme. Of this, only 2 million tonnes has been sold under contracts, while 15 million tonnes lies unsold.

As a result, the PWO needs to ask for an additional Bt2 billion for stockpiles next year. 

The spending on rice stocks is about Bt100 a tonne per month. These include warehouse or silo rental fees at Bt20 a tonne, insurance, rice bags, fumigation, labour and rice-surveyor wages and transport.

Somsak acknowledged that the PWO’s capacity for rice stocks had been fully taken up and it needed additional space for more than 2 million tonnes of rice brought in under the programme. 

 

 

Pricey project

 

Bt661.2 billion

Money spent on the rice price-pledging project in the last two years

 

Bt220.9 billion

Cumulative loss from the project, as of January 31

 

Bt260 billion

Estimated cumulative loss by the end of May

 

Bt393.9 billion

Cumulative loss from the project during the governments linked to Thaksin Shinawatra