The new government's populist rice-pledging scheme will be a short-lived subsidy lasting only one year if it fails to influence market prices for rice, Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong said yesterday

In the case of an unsatisfactory price outcome, the government will seriously consider reducing the area planted with rice as an alternative mechanism to increase prices.

There are now plans to begin the pledging scheme on October 7. Its first effect will be to jack up domestic prices for rice by about 25 per cent and lift the export price for white rice to more than US$750 or $800 (Bt22,486 or Bt23,993) per tonne, increasing the burden on rice consumers both locally and overseas.

At a meeting with farmers, millers, exporters and related government agencies yesterday, the commerce minister said the pledging project would be on trial for a year, to see whether it would drive up rice prices.

"If the market does not respond, the government will encourage farmers to reduce farmland [planted to rice] and shift to growing other economic crops," Kittiratt said.

The National Rice Policy Committee will soon meet to decide whether to implement the pledging scheme on October 7. There has been pressure from farmers for the launch of the programme before its original schedule in November.

Under the government's plan, there will be no limit on the volume of rice qualifying for the pledging scheme. The country's main harvest, which usually occurs in November, is expected to produce 8 million tonnes of paddy, or unhusked, rice. The pledging price will be Bt20,000 per tonne for paddy jasmine rice and Bt15,000 for paddy white rice.

Thai Rice Exporters' Association honorary president Vichai Sriprasert said it was very difficult to figure out how overseas buyers would respond to a sharp increase in the price of Thai rice. If they fail to respond, the government will face huge problems stocking large amounts of rice, as exports will fall substantially.

Export prices for Thai rice will surge continuously when the pledging scheme is operating, to more than $700 or $800 per tonne for white rice.

Vichai said consumers and buyers were not the only ones facing a higher burden. Exporters will be in trouble simply for being in the business.

He said the government must ensure that its rice-releasing procedure was transparent and fair, so every trader could join in the bidding.

Thai Rice Packers' Association president Somkiat Makcayathorn said domestic prices would increase by 25 per cent immediately after the pledging scheme began.

The price of jasmine rice will be Bt40 to Bt50 higher per five-kilogram pack, above the present price of Bt180 to Bt200, while the retail price of white rice will increase by Bt20 to Bt30 per pack from Bt120 to Bt130.

However, he said if exports were seriously damaged by the scheme's reintroduction, domestic prices might not rise significantly because of low demand from exporters.

Thai Rice Exporters' Association president Korbsook Iamsuri said rice prices would increase gradually in response to the hiking of prices in Thailand.

She worried that some rice-importing countries would shift to purchase their rice from other countries, as Thai prices would be too high compared with other staples.

Korbsook said small exporters would be the first to suffer from the higher rice prices as they would be unable to purchase rice from the market by competing with the government.

She urged the government to provide soft loans and create new marketing and promotion plans to ensure the growth of Thai rice exports.

Thai Rice Millers' Association vice president Banjong Tangjitwattanakul said the pledging scheme would drive the export price of white rice to $750 a tonne, while the price of jasmine rice would reach $1,200 to $1,300 a tonne.

The export price of 100-per-cent white rice is currently quoted at $563 a tonne, and that for jasmine rice is $1,092 a tonne.

Source: The Nation