'No return to pledging'

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'No return to pledging'
Political agenda seen in demands
Published: 10/03/2010 at 12:00 AM
"Bangkok Post": Newspaper section: Business

Despite calls from some farm groups to bring back traditional rice pledging, the government insists it will maintain its new price insurance programme for the second crop.

The income structure for farmers under the insurance programme is appropriate, spokesmen said after a meeting yesterday of the National Rice Policy Committee chaired by Prime Minister Abhisit Vejjajiva.

Praphat Pothasuthon, a veteran politician and former secretary-general of the Chart Thai Party (now Chart Thai Pattana Party) has vowed to lead farmers from 20 central provinces to rally tomorrow at the Commerce Ministry for a return to the price-pledging scheme.

The current insured prices for rice are based on average production costs and a profit margin of 30% to 40%.

The government first introduced the crop insurance or options programme for the 2009-10 harvest season to manage key crop prices and guarantee farmers' incomes.

It replaces the pledging scheme, used by successive governments, which usually offered prices well above market rates and proved to be politically popular in rural communities.

However, such programmes left the government holding huge stocks of rice on which it would lose money when the grain was sold later.

Price insurance represents income support paid directly to farmers. Payments are based on the difference between insured prices and benchmarks, regardless of the market prices farmers receive when they sell their crop.

Under the Thaksin administration, the government would initially set mortgaged prices of paddy for farmers to pledge with registered millers.

Millers would earn income, not only from storage fees of 20 baht per tonne of paddy, and 216 baht a tonne of milled rice each month. But more importantly, they enjoyed huge profits from chances to secretly trade the grain in their warehouses as many times as they wanted as the government had no plan to reload the rice stockpile.

An industry source said that in order to enjoy such attractive profits, many millers offered under-the-table payments to officials to ensure that their mills were chosen.

"One other example of malpractice by millers involved bribing officials to miscalculate the weight of rice to store at the warehouses and the missing portion would go to millers' pockets," the source said.

"This collusion occurred for years and built up enormous income for the involved parties. That's why local politicians, millers and officials backed the scheme."

It has also been reported that traders bought lower-priced paddy from neighbouring countries to get higher prices offered by the Thai scheme, at 12,000 to 14,000 baht a tonne.

Dr Nipon Poapongsakorn, president of the Thailand Development Research Institute, earlier estimated that the government spent 18 billion baht under 2008-09 pledging for 5.4 million tonnes of rice. However, only 600,000 farmers or 38% benefited, while the rest went to non-farmers, mainly exporters.

Thaksin would roll back clock

Former premier Thaksin Shinawatra told his red-shirt followers late Monday that if he returned to power, he would restore the government's traditional rice mortgage programme.

The Abhisit Vejjajiva government scrapped the crop pledging programme last year in favour of an intervention scheme that compensates farmers if crop prices fall below established benchmark prices.

In the past, the Bank of Agriculture and Agricultural Co-operatives offered loans to farmers with crops pledged as collateral. During the Thaksin government, critics said pledging prices were set at unrealistically high levels as an indirect subsidy to farmers at the expense of taxpayers.

Thaksin, speaking through a video link from Dubai, called on younger supporters to rise up and fight for the best interests of the country against the "old guard" who wanted to return to static policies of three or four decades ago.

"If Puea Thai returns to power, I will support the use of the rice pledging system like before," he said. The opposition Puea Thai party was formed largely by former supporters of Thaksin's Thai Rak Thai party, which was disbanded by the courts for election fraud.