The caretaker government was given a breather after the Election Commission (EC) allowed it to continue selling rice stocks as usual, a move that could raise funds to ease the tight liquidity in the government's rice pledging scheme.

Caretaker Deputy Prime Minister and Commerce Minister Niwatthamrong Bunsongphaisan said the ministry was informed by the commission it could keep selling rice stocks through government-to-government deals, auctions using the Agricultural Futures Exchange of Thailand, and private purchase proposals.

He said there is purchase interest from the private sector to buy 500,000 tonnes of rice.

Rice talks with China National Cereals, Oils and Foodstuffs Corporation, a Chinese state-owned food conglomerate, which earlier was interested in buying 1 million tonnes of rice, would be resumed.

Delivery for this deal is likely this year, he said.

Mr Niwatthamrong said this deal would be separate from a contract to sell 1.2 million tonnes of 5% white rice signed late last year to a state enterprise in Harbin, the capital of northeastern China's Heilongjiang province.

In the two years of the government's troubled pledging scheme, it has returned 180 billion baht raised from rice sales to the Bank for Agriculture and Agricultural Cooperatives (BAAC).

For the main crop of the 2013-14 harvest season, 10 million tonnes of paddy are expected to be pledged, costing the government 140 billion baht. From last Oct 1, when the main crop began, to this past Tuesday, 9.97 million tonnes of paddy were pledged under the scheme. The main crop runs until Feb 28.

Mr Niwatthamrong said 30 billion baht has been paid to farmers in the scheme, and the government is trying to accelerate the payment of another 77 billion to farmers funded by loans from the BAAC, the Finance Ministry's regular budget and rice sales by the Commerce Ministry.

He said the Finance Ministry reported the scheme is short of around 40 billion baht for payment to the farmers, which it needs to borrow. The ministry is asking the EC to sign off on letting the government borrow 130 billion baht to pay farmers in the scheme.

A 130-billion-baht loan is part of a financial framework the cabinet already approved to spend 270 billion to finance paddy purchases for the main and second crops of 2013-14.

A Finance Ministry source said the EC may interpret a BAAC loan with a ministry loan guarantee for the current harvest year to be unconstitutional.

The constitution bars caretaker ministers from acting on or approving any jobs or projects that are bound to the next cabinet.

But Mr Niwatthamrong believes the EC will grant permission for the loan, as it considers only whether projects would be used for election campaigns or are bound to the next government.

The planned rice purchases for the current harvest season are a continuation of a programme the cabinet previously approved, he said.

If the EC denies the loan request, the government can still raise money from rice sales, said Mr Niwatthamrong.

He said in case of tight liquidity, the government will ask the BAAC to set aside some liquidity to pay rice farmers in advance while the government pays the interest to the bank.

"This practice has been used before, and in previous years the bank gained lucrative revenue from the government's rice pledging scheme," he said.

Source: Bangkok Post