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The Government Rice Pledging Scheme

Rice_FieldOn June 25th 2013, Commerce Minister Boonsong Teriyapirom accepted a letter from a representative of farmers requesting the government to reverse its decision to reduce the price for rice under its pledge program by 20%, from 15,000 baht per tonne down to 12,000 baht per tonne.

Approximately 500 farmers from around the country held a brief rally in front of the Government House on Tuesday and only agreed to disperse after their representative had submitted a written demand to Mr. Boonsong. In an attempt to ease the situation, the Commerce Minister promised the furious farmers that the National Rice Policy Committee will consider their demand to maintain the government’s paddy pledged price for ordinary rice at 15,000 baht per tonne until at least the end of the harvest season in September.

Commerce Minister Boonsong Teriyapirom, receiving farmers letter demanding the pledged rice price be held at B15,000 a tonne for paddy. (Photo by Kitja Apichonrojarek)

Commerce Minister Boonsong Teriyapirom, receiving farmers letter demanding the pledged rice price be held at B15,000 a tonne for paddy. (Photo by Kitja Apichonrojarek)

The letter was submitted by Phuti Srisamutnak, President of the Thai Farmers Promotion Association, Prasit Boonchoey, President of the Thai Rice Farmers Association, and Wichean Puanglamchiak, President of the Thai Farmers and Planters Association. They have given the government one week to respond to their demand before they take their case to the courts. Mr. Wichean said that the reduced price was not acceptable because it would simply not cover rising production costs that followed after the government launched its 15,000 baht fixed price for rice policy.

The cabinet decided to lower the rice purchasing price last week after finally admitting an huge loss of at least 136 billion baht in the first year. Despite the losses, the government decided not to abandon its rice-pledging scheme but will proceed with it in a more sustainable way. The government admitted that it had no choice but to lower the price given the state of the markets and the need for fiscal discipline. The Prime Minister restated the government’s confidence during her previous appearance on the Yingluck’s Government Meets the People program, that rice-pledging would improve the quality of life of the nation’s farmers. She also explained that the original pledge price of 15,000 baht per tonne was 40% above the prevailing market rates.

The truth is that right now the government is currently sitting on tonnes of rice it cannot sell, with an accumulated debt that keeps on rising. Despite all of this, the premier still stands behind her government’s policy by citing that the scheme has helped spur domestic consumption and enhanced economic expansion through the rising income of farmers, a factor that has stimulated the national economy. “The price cut is intended to better balance costs, quality, global prices and fiscal discipline. The cabinet had no option but to approve the cut as world rice prices did not increase last year. If global prices were to increase in the future, the pledge price will be adjusted accordingly”, she said.

She was responding to criticisms by Bank of Thailand Chairman Virabongsa Ramangkura who wanted the government to get rid of the scheme altogether. Mr Virabongsa, said the programme is leading to more debts and corruption. He believes that the scheme does not benefit farmers, only politicians and millers. Ms. Yingluck asks critics to interview the farmers directly whether they were benefiting from the rice pledging scheme or not. She insisted that her administration specifically designed the scheme to help farmers. Ms Yingluck also added that mechanisms were already in place to tackle corruption in the scheme. In an interview on 22nd June 2013, Deputy Commerce Minister Nattawut Saikuar said that provincial police officers will observe operations at participating warehouses in an attempt to prevent any irregularity during the storage and stockpiling process of rice under the government scheme.

According to Suan Dusit Poll (SDP), almost 60% of people disagree with the government’s plan to cut rice payments. Reducing pledged prices would create hardship for farmers who had already bought fertilizer and pesticide. They would face losses, one respondent said. The pollsters at SDP revealed that 59.16% of respondents disagreed with the price cut while 25.19% supported the decision while another 15.65% had no opinion. People who supported the lower pledged price said that it would reduce government losses since the original price was too high and should have been based on market prices. (Source: Bkk Post)

According to another survey conducted by Nida Poll, 59% of respondents disagreed with the rice price reduction while the majority of them said that their sympathies were with the farmers. Other suggestions from those who were surveyed said that the government should seek to reduce its debts by combatting alleged corruption within the scheme rather than lowering the promised rate. Sharing the same point of view of those polled by SDP, 36% of people who agreed with the price cut in Nida poll also believes that it would ease the financial burden on the government. (Source: Bkk Post)

From an exclusive interview with TRS.org on June 26th, Assoc. Prof. Tida commented that “farmers have the right to demand for help because they are losing benefits and the government has the responsibility to listen to their pleas. It is understandable that the government job is to look at the big picture but at the same time they cannot ignore demands coming from farmers. The government needs to devise a new plan for the rice pledging policy that will benefit all the parties, especially the farmers.”

The reduction of 3,000 baht, down from the 15,000 baht pledged price, can only spell trouble for the farmers due to the increase of production costs since the beginning of the price pledging programme. Prices for rent, fertilizers, seeds, pesticides, and water pumps increased after the price pledging scheme coupled with the limiting quotas of rice in the programme means that farmers cannot afford to go along the price reduction even though the scheme seems profitable. The mere fact that farmers are protesting against the reduction of the price of rice under the price pledging programme is a testimonial in itself that the scheme is beneficial for them as opposed to the previous income insurance programme which was introduced by the Democrats.

“In the past, farmers can sell their rice but it is only enough to scrape by. The money that we get does not allow room for other opportunities while the standard of living is well below the norm. Since the price pledging programme was introduced, farmers have been able to live a better life and they now have more opportunities for the future” said Mr. Prasan Klongthong, local leader and farmer from a village in Nontaburi province, in the “Look Back and Glance Forward for Democracy” show on Asia Update Channel last week.

Another farmer and local leader of a village in Nontaburi province, Mr. Dumglungsak Srijaroen, pointed to the errors of the Democrat income insurance programme in the past. According to Mr. Dumglungsak, there are three flaws under the income insurance programme; 1. Anybody who owns a piece of land can register under the programme even though they do not produce rice (lack of inspection from the government). 2. Farmers who do not own their land (most of them rent their land) cannot benefit from the income insurance programme; only the owner of the land can claim the insured money. 3. The insured profit from the rice under the income insurance programme is not paid right away at the mills. The farmers have to be reimbursed the insured by the government banks while the price is dictated by the government themselves, leading to income instability for the farmers (under the pledging programme the farmers received their money at the mills).

Taken from Post Today Newspaper on 23/06/13

Taken from Post Today Newspaper on 23/06/13

According to Mr. Choomporn Dartyu, local leader and farmer in Nontaburi province, the cost for production of rice is around 7,000 baht per rai and 9,000 per tonne. The variation of the expenses for producing rice is dictated by the equipments, locations and methods the farmers used to produce their rice. The price you get from one tonne of rice is determined by the quality of the rice which depends on the moisture content, foreign elements in the rice and corruption. Farmers complain that the 15% moisture content rule has been widely abused by millers to lower the price paid. Now, when the pledging price was at 15,000 Baht per tonne, the price received for many was around 11,000 Baht per tonne. This gives them a profit margin of 1,000 – 2,000 baht per tonne for 3-4 months of hard labor per harvest season. The proposed reduction to 12,000 Baht per tonne will reduce further the price received for many to below 9,000 baht which is equal to the cost of production.

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