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Rice pledge scheme: Who should we trust - economist, accountant or politician?

Rice pledge scheme: Who should we trust - economist, accountant or politician?

So, what's the estimated loss the government will incur from the controversial rice price-pledging scheme?

Former deputy premier and finance minister MR Pridiyathorn Devakul predicts the loss will be in the range of Bt200 billion a year.
No, says Deputy Premier and Commerce Minister Niwatthamrong Boonsongpaisarn, that figure is far too high. A “reasonable estimate” of the deficit would be around Bt100 billion annually, he says.
Finance Minister Kittiratt Na Ranong suggested that Pridiyathorn’s assessment of total losses of Bt425 billion was a “misunderstanding”.
That, the minister said, was due to the fact that some economists simply don’t understanding accounting.
“Some economists might not appreciate the difference between accounting loss and the real loss on this project,” Kittiratt said. “And when they produce these numbers for the public, they can create the wrong kinds of perceptions.”
Of course Pridiyathorn did study accounting – and did quite well at that. The discrepancy has nothing to do with one’s knowledge of accounting. It’s based on the fact that the government and its critics were using two different sets of rice prices: One was based on the purchase price of paddy at Bt15,000 per tonne (or Bt24,000 per  tonne of milled rice) while the other was calculating the loss on the basis of the market price.
That’s why both can claim the other side was wrong. As far as accounting is concerned, they were on different pages and talking at cross-purposes. Technically, both sides might be right. Politically, only one party can convince the public that it’s telling the truth.
If one was running a private company listed on the stock market and under the shareholders’ constant scrutiny, the profit-and-loss account must necessarily be based on the market price so that management can make plans for “real losses” and not “paper losses”.
If the government was to be up front with the public, it could offer both the accounting loss and the real deficit so that the taxpayers could determine for themselves how big of a financial burden they consider acceptable.
In accounting terms, this is called “lower of cost or market” (LCM), or replacement cost. It’s known as a “conservatism principle”, which means you don’t attempt any of the “creative accounting” that politicians favour but which can wreak havoc on the real bottom line – the country’s coffers.
The politicians were obviously embarrassed by the professional accountants at the Finance Ministry in charge of “closing the books” on the rice price-pledging project. This particular working group was headed by a tough, professional accountant, Supa Piyachitti, who was rightly determined to tell it like it was.
Supa reported that the first two harvests saw the government lose Bt136.89 billion, based on the market price at the time. Her political bosses were furious and initially refused to accept the number. Under great public pressure, though, the ministry’s chiefs had to grudgingly take that number as the official statement. Since the price of rice has since been on a downward trend, it’s likely that, if the books were revised today, the size of the deficit would be even greater.
Then there are the stories flying around that the Commerce Ministry has been selling rice stocks at even lower prices to certain groups of traders. This has fuelled speculation that the government’s bottom line in this case could be even worse, as much as 30 per cent lower than the already low level of revenue.
Is that why we taxpayers haven’t been shown the real “income statement” and “profit-and-loss accounts” of this scheme that has been the subject of heated debate? Is this why all the talk about government-to-government deals and memoranda of understanding with this and that government has not been substantiated with transparent disclosure of details pertaining to the supposed contracts?
It has come to a point where it’s not clear who is the taxpayer’s worst enemy: the economist, the accountant or the politician.
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