Most farmers, millers, rice traders and exporters say they prefer the income-guarantee policy proposed for rice farmers by the Democrat Party, rather than the pledging scheme for rice prices proposed by Pheu Thai
Their representatives concluded after a political debate yesterday that an income-guarantee programme would ensure them real benefits, would not distort market mechanisms, would be more transparent, and would cost the country less.

They said they had learned hard lessons from the long-term "domino effects" of the pledging programme on the country's rice businesses. In particular, they didn't want to see circumvention of such a programme by cheap rice smuggled in from neighbouring countries to receive the higher Thai prices.

The debate was entitled "Rice Policy of a New Government: Guarantee Policy versus Pledging Policy - Who Wins and Who Loses?" It involved representatives of the two leading political parties - the Democrats and Pheu Thai - and was hosted by the Economic Reporters' Association in conjunction with concerned rice associations. Later, most participants found more satisfaction with the income-guarantee programme proposed by the Democrat Party.

Although both policies are price-subsidy practices, association representatives shared the same view - that the pledging scheme proposed by the Pheu Thai party was a backward policy that would create a loss of about Bt150 billion per year. The Democrats' income-guarantee policy, on the other hand, would cause a lesser loss of Bt65 billion per year.

Of particular concern was the belief that a pledging scheme would abruptly affect consumers, as domestic rice prices would rise by an average of Bt11 per kilogram.

Led by Democrat strategy-maker Korbsak Sabhavasu and Pheu Thai's economic working-committee member Wattana Muangsook, the forum heard a broad range of opinions, many of them settling on a firmer trust in the income-guarantee policy.

As proposed by the Democrats, the income-guarantee programme would be calculated on the basis of a farmer's production costs plus 50 per cent profit and Bt300 to Bt600 for transportation costs.

The pledging scheme proposed by the Pheu Thai Party involves a pledging price of Bt15,000 per tonne for paddy white rice and Bt20,000 per tonne for paddy jasmine rice.

Thai Rice Mills Association honorary president Pramoth Vanichanont said the income-guarantee project would create more sustainable development for the rice industry. The pledging programme, which proposed a very high price subsidy, would lead to huge losses for the government. Even then, not all farmers would benefit from it.

"All players, including farmers, millers, traders, exporters, politicians and government officials would have a high opportunity for involvement in corruption under the pledging scheme," said Pramoth.

He said Pheu Thai's pledging scheme proposed a price of Bt15,000 per tonne for paddy white rice, which was 77 per cent above current market price. This would cause much difficulty in rice trading. The policy would also drop Thailand's export volume significantly, from 8 to 10 million tonnes per year to only 2 to 3 million tonnes in the near future, because of uncompetitive prices.

"Rice prices that are too high will prompt rice consumers to shift to consume other grains and cereals," Pramoth said, adding that the new government should proceed with an income-guarantee programme, while price pledging should be left as an alternative method.

He said the new government should also support the establishment of a rice fund to encourage research and development.

Thai Rice Exporters' Association honorary president Chookiat Ophaswongse said the income-guarantee scheme would create a win-win situation of benefits to farmers via direct subsidies while maintaining the competitiveness of traders and exporters because the subsidies would not distort the market mechanism.

"Pledging prices [such as proposed by Pheu Thai] that are too high will push up the export price of Thai rice to more than US$850 (Bt26,038) a tonne, from a current price of $490 to $500 a tonne. Thailand will lose its export competitiveness to rivals such as Vietnam," he said.

Thawee Pattana Mill's managing director Pisit Sa-nguankulchai said good enterprises preferred the income-guarantee programme because it created a fair and level playing field for all involved players. In addition, the benefits would go directly to farmers and the government's loss burden from a huge rice stockpile would be reduced.

Nakhon Prathom Rice Mill Association former president Somsak Tachasirinuguae said the proposed pledging scheme would lead to "rice circumvention" due to the attractive price gap between Thai rice and that from neighbouring countries. As a result, the subsidy package will not only pay for Thai rice but also for imported rice.

"The most important thing is that the pledging scheme will damage the rice business," he said.

Thai Rice Farmers' Association president Prasith Boonchuey said most farmers preferred the income-guarantee proposal because every household would gain from it. However, the government must focus more on reducing farmers' production costs.

"Farmers want to see the government create ways to help them reduce production costs and to achieve stable returns," Prasith said.

Democrat speaker Korbsak said that the Abhisit government spent Bt58 billion over the past two years on its income-guarantee project for rice farmers, and people on the land had benefited from the project.

He said pledging programmes had created a giant loophole for corruption during the rice-releasing process. For instance, the government lost Bt16.08 billion when just 1.1 million tonnes of rice was released from its stockpiles during the administration of Somchai Wongsawat.

Pheu Thai's Wattana said that pledging projects in the past had created huge losses for the government because of inefficient management.

Source: The Nation