There can be no more reversals on pledge scheme
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The govt has made its own bed with its rice price guarantee, now it must lie in it and reap the consequences
Despite heavy pressure from farmers, who constitute the majority of votes, the Pheu Thai government should not and must not give in. Another change in the rice-pledging price will only further dent confidence in the government, aside from fuelling concerns on the fiscal front.
Today the National Rice Policy Committee will convene. As usual, Prime Minister Yingluck Shinawatra, though chairperson by title, is not expected to show up. This has been the situation for the past few months. As usual, Commerce Minister Boonsong Teriyapirom will chair the meeting. But today’s meeting is unlike previous ones – the decisions that are made could have huge financial repercussions for the country in the years to come, as well as on the government’s already-tainted credibility.
Tabled for discussion is the rice-pledging price. At the last meeting the committee surprised critics and farmers by resolving to cut the guaranteed price from Bt15,000 to Bt12,000 per tonne, starting with the second crop for the 2012-2013 harvest year. Critics welcomed the move, since the reduced price is closer to global rice prices, which will help facilitate rice exports and thus limit losses from the national coffers.
In response to the cut, farmers have launched big demonstrations, saying the decision was too sudden. They have invested large sums in their main and second crops, expecting that the price for both would hold at Bt15,000.
The Pheu Thai-led government promised that payment on the conviction that drought in several places around the world would keep global rice prices at a high level. However output has put pressure on prices. From nearly US$1,000 per tonne in May 2008, white rice is now trading at below $500.
The US Department of Agriculture has forecast that the rice inventories of many countries, including Thailand, will increase this year and next. While Myanmar, once the world’s biggest rice exporter, is boosting output, on the consumption side Indonesia, one of the world’s major rice importers, will harvest more rice for local consumption under its self-reliance policy.
The Thai government’s misguided policy has resulted in a huge loss for the taxpayer, estimated at over Bt100 billion for each harvest year. Plus, over the past two years, no action has been taken to plug loopholes that limit farmers’ ability to reap the full benefits of the scheme.
The pledge-price revision shows the government might have finally come to its senses, realising that the rice price must be more closely aligned to global market conditions. The potential for corruption will also be narrowed.
If the government is serious about lifting the standard of living of farmers, there are other ways to do so without maintaining the pledging price. One of Pheu Thai’s election-campaign promises, the farmer’s credit scheme – to help lower the cost of farming materials – has not yet been fully exploited. The Bank for Agriculture and Agricultural Cooperatives’ plan to lend Bt10 billion to some farmers at a low interest rate is a good initiative, and this can be extended to cover more or all farmers. Instead of draining away more money in the pledging scheme, the government could allocate some of the central budget to support research and development for better seeds, crops and farming methods. Agricultural zoning should be moved ahead at full steam so that farmers know in advance what they should grow and how much government assistance they can expect.
Politicians can lose face, but not credibility. Julia Gillard, Australia’s first female prime minister, upset voters partly because she had ousted an elected prime minister. But as that situation rebounded on her, she walked out of politics, proud of her government’s achievements, which include the introduction of an unpopular carbon tax paid by the biggest industrial polluters. Compared to the carbon tax, the rice price-pledging scheme is a populist policy that does not truly benefit anyone but rice millers and middlemen. Prime Minister Yingluck must stand firm or another wrong move will leave her with nothing at the end.
