The government's policy to buy up paddy rice at Bt12,000-Bt20,000 per tonne from farmers will end up giving a windfall to rice producers around the world at the expense of Thai taxpayers, Democrat MP Trairong Suwanakiri warned yesterday.

"The higher price will also benefit other rice exporters - the United States, Vietnam, Pakistan and India. This means Thai taxpayers will be providing subsidies to them," he said during the second day of parliamentary debate on the government's policies.

If Thailand, the world's biggest exporter of the grain, raises its rice prices, global prices would tend to follow.
Trairong said the cost to rent silos alone was at least Bt10 billion a year. Storing perishable goods is a misplaced policy, as rice quality will be degraded.

The policy will not encourage farmers to cut production costs, he said. This will lead to losing market share to Vietnam's farmers, who focus on cost reduction. Thailand has already surrendered its dominant position in the Asian market to Vietnam, which now controls 70 per cent of the market because of its lower price, he added.

Deputy Prime Minister Kittirat na Ranong, who is also the commerce minister, on the first day of debate defended the new government's rice-pledging scheme and slammed the income-guarantee model of the past government. He said the cost was high at Bt124 billion for the country during the two years it was implemented.

Although the income guarantee had covered every farmer, including those suffering from natural disasters, it did not drive up rice prices in the past two years, while other cereals went up by 50 per cent.

The rice-pledging project is expected to cost less than Bt100 billion a year and create less than a Bt10-billion loss for the government. It will push up rice prices, giving farmers more income. The government will only subsidy rice for domestic consumption and will not provide support for the export sector, he said.

Rice is one of the country's major export commodities, bringing in more than Bt5 billion a year.

However, rice exports could plummet because of the lack of competitiveness and higher price, according to rice exporters.

Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said the income-guarantee method had allowed the market mechanism to do its work. Although rice prices did not increase much in the past two years, the price of Thai rice was quoted in line with the market price and prices in other countries.

Normally, rice prices will be double that of other cereals. Thai rice was traded at US$500 (Bt15,000) a tonne, while wheat was moving at $260 a tonne. The government should not compare rice prices during the past two years with prices in 2008 when there was a food crisis and prices spiked.

Because of the government's plan not to support the export sector, Thai rice exports were at risk of plunging, as the skyrocketing price of rice resulting from the rice-pledging scheme would encourage consumers to switch to substitute cereals, Chookiat said.

While the pledging policy is expected to cause higher rice prices in the short run, as the government will still have space to stock rice, Thailand would no longer enjoy the distinction of being the world's leading exporter. Thai rice would be too expensive compared with that from other countries and with other grains, he said.

Source: The Nation