Economists examining the government's rice policy have big questions on its chances of success.

Though there is no clear implementation plan, Commerce Minister Kittiratt Na-Ranong is betting that the pledging measure will manipulate rice prices in the global market.

The Commerce Ministry is set to start the rice-pledging scheme next month amid strong criticism by economists and rice exporters.

The government wants to raise the minimum price of white rice to Bt15,000 per tonne, so it has to build large stockpiles of rice from the 2011-12 crop and in later years.

Olarn Chaipravat, chief economic adviser of the Pheu Thai Party, was one of the key players behind the policy to revive the rice-pledging scheme. Olarn and Pheu Thai politicians believe that they can take advantage of the volatility of food prices in the global market by limiting supplies to boost rice prices.

The idea is to time releases of rice stocks into the market when it will bear the higher prices, similar to how investors speculate on the rise and fall of shares in the stock markets.

But some are pessimistic about the likelihood of success.

Pheu Thai, which leads the new coalition government, has often claimed that it is possible to manipulate rice prices just as the oil-exporting countries do with their product. But oil is not perishable: it can be held in reserve without deteriorating, while the quality of stockpiled rice declines over time.

The former government of Thaksin Shinawatra tried to form a rice cartel with Vietnam and other rice producers but failed, as Vietnam still offered rice at a much cheaper price than Thai products.

"The government is whistling in the dark," said Ammar Siamwalla, a prominent economist who has researched past government impositions of export premiums on rice designed to help urban consumers. He was a key man behind the successful campaign to scrap the rice premium.

Now, Ammar and others strongly oppose the government plan to implement a rice-pledging scheme, claiming it will be costly and ineffective.

Nipon Poapongsakorn, president of the Thailand Develop-ment Research Institute, an independent think-tank, said: "I don't think the rice price will move as sharply as the government expects unless some rice producers impose an export ban." Some rice producers imposed such a ban in 2008, which partly caused rice prices to spike.

The rice price early this year was about Bt8,000-Bt9,000 per tonne. Now it is about Bt10,000, as millers have speculated on the price in the belief that the government would boost it. "But the price is still a long way from Bt15,000," Nipon pointed out.

Ammar and Nipon supported the income-guarantee scheme for farmers conducted by the previous administration of Abhisit Vejjajiva, because of its lower cost and the large number of farmers who benefited from it.

The rice-pledging scheme by the administrations of Thaksin and his successors proved costly, with a debt overhang of about Bt100 billion for which the government has not yet compensated the Bank for Agriculture and Agricultural Cooperatives, whose loans financed the programme.

Critics say the programme also provides the wrong investment incentive to millers, which already have overcapacity - ability to mill 60 million tonnes of rice, while annual production is half that. They will get silo-rental fees from the government, which does not have enough of its own storage facilities.

Taxpayers stand to lose if the global rice price does not rise as high as the government is betting. They will foot the bill for the costs of this pledging scheme, while consumers will also pay higher prices. Besides the possibility of widespread corruption, only a few rich farmers, a few millers and a few exporters will benefit, according to Ammar.

We can conclude that the new government is making a big gamble with taxpayer money.

Source : The Nation