Thai government defers decision on rice price cut

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The Thai cabinet has not yet decided whether to cut the price and limit the volume of rice the government will buy in future, Prime Minister Yingluck Shinawatra said on Tuesday, defending a scheme that has already caused $4.4 billion in state losses.

Commerce Minister Boonsong Teriyapirom had said the cabinet would discuss a proposal to cut the price paid in the controversial state support scheme to between 12,000 baht ($390) and 13,500 baht ($440) per ton from 15,000 baht, a level that has made Thai rice uncompetitive in export markets.

"We haven't decided yet. We need to get more clear information from the National Rice Committee before making any decision," Yingluck told reporters after the cabinet meeting.

The government's ambivalence illustrates the tough path it has to navigate as it attempts to retain vital political support from farmers and sustain a budget-draining program.

On Monday the National Rice Committee put the scheme's losses for the October 2011 to September 2012 crop year at 136 billion baht ($4.4 billion), the first real estimate from a government body since the present scheme began in October 2011.

It did not give details of the cost of the scheme in the current crop year.

Moody's rating agency warned this month that losses from the scheme threatened the government's goal of a balanced budget and were therefore "credit negative", adding fuel to a political row over a program that critics say is wasteful and corrupt.

Yingluck said on Tuesday ministers needed up-to-date information on the volume of rice in state warehouses and its value.

"I have assigned finance ministry officials to assess the value of stocks and the losses we may get and then we will discuss this again later," she said, adding that intervention helped poor farmers and the program would continue.

A cut in the intervention price could aid in reviving exports and perhaps help Thailand reclaim its position as the world's biggest rice exporter, which it lost to India last year. Vietnam also overtook it.

The current buying price is estimated by exporters to be as much as 50 percent above the market level.


In 2011/12 the government said it would buy all the grain offered to it. In the current crop year, it started by offering to buy an unlimited amount but later excluded some low-grade varieties.

Thailand is forecast to produce 27.5 million tons of paddy from the 2013/14 crop, up 2.2 percent from the previous crop as the high intervention price has encouraged farmers to grow more rice, according to the Agriculture Ministry.

Farmers have said they would accept some restrictions to the intervention and even a lower price if that helped the government maintain the scheme and support their income.

Traders and industry officials said a cut in the intervention price was the best option for the government, which needs to retain the support of millions of rural voters but also has to contend with the financial strains caused by the scheme.

"This is the only way for the government to survive as it can't stop the scheme, which brought it to power for sure. It needs a soft landing," said Niphond Wongtra-ngarn, a former head of the Thai Rice Millers Association who is now an adviser to a parliamentary agricultural committee.

The government has put the amount of rice left in stockpiles at 17 million tons. As a comparison, before the intervention price made Thai rice uncompetitive on world markets, the country exported a record 10.6 million tons in 2011.

The Bangkok Post said on Tuesday the government spent around 352 billion baht on buying 21.7 million tons of rice in 2011/12. Sales were put at around 59.2 billion and the value of remaining stocks, based on Jan. 31 prices, was 156 billion, giving the provisional loss of 136 billion.

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