Wednesday, November 13, 2019

The similarities – and difference – in the rice policies of Yingluck and Prayut

Nov 08. 2016
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By Nophakhun Limsamarnphun
The Nation

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Prime Minister Prayut Chan-o-cha has followed the path of his predecessors, including former premier Yingluck Shinawatra, in addressing the plight of rice farmers hit hard by a price slump.

So far, the Prayut government has endorsed combined spending of Bt53.9 billion in taxpayers’ money to shore up domestic rice paddy prices via rice-pledging and low-interest loan schemes.

In general, these rice-pledging schemes share similarities with those used by the previous Yingluck government, though their scale is vastly different.

Under Yingluck, more than Bt700 billion was spent to buy over 20 million tonnes of rice from farmers at a far more generous price than offered by the market, resulting in massive losses in excess of Bt500 billion.

By comparison, the Prayut government’s state budget for rice subsidies is less than 10 per cent of what its predecessor spent on such schemes.

During Yingluck’s tenure, the schemes were excessive, encouraging farmers to grow more and more rice, which in turn depressed both domestic and international prices due to massive over-supply.

At present, the government’s stockpile of rice is at a record high of 8 million tonnes, compared to normal levels of between 2 and 3 million tonnes.

In addition, the previous government set much higher levels for its price pledges, offering more than Bt20,000 per tonne for Hom Mali rice and Bt15,000 per tonne for white rice, compared to the Bt13,000 and Bt10,500 per tonne pledged by the Prayut administration.

Under the current rice-pledging schemes, each farming household is entitled to subsidy on a maximum of 10 rai. 

During Yingluck’s term, there was no limit on the amount of farmland subsidised by the government, resulting in the massive losses.

The Bank for Agriculture and Agricultural Cooperatives (BAAC) alone provided Bt500 billion to finance the previous government’s pledging schemes, including issuing bonds worth a combined Bt400 billion.

The Finance Ministry recently set aside funds from the first annual budget to pay back the money borrowed from the BAAC and declared the payback period would last several years.

In fact, rice-pledging schemes do not qualify as long-term solutions to the problems of rice farmers. Production costs are currently Bt6,000-7,000 per tonne of rice, so farmers are actually making little if any profit and in some cases even losing money.

The government’s target is to halve the output of rice for the second crop to around 4 million tonnes, though targeted output from the first and main crop will remain at around 23 million tonnes.

A tonne of rice paddy yields 0.66 tonne of milled rice.

The country’s domestic market consumes around 10 million tonnes while export demand is 8-10 million tonnes per year. The government has to formulate policies to facilitate an equilibrium in demand and supply to avoid excessive price fluctuations and a heavy burden on public finances when market intervention is required to ease farmers’ hardship.

However, taxpayers and prudent fiscal policies have regularly fallen victim to politicians, who have routinely used national rice policies to curry favour with farmers.

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