The Commerce Ministry's plan to sell 753,000 tonnes of rice and paddy may face up to 6 billion baht in losses as bidders are likely to offer market prices.

The ministry will call a meeting today to scrutinise the qualifications of tenders before awarding winners tomorrow.

The tenders cover 210,660.9 tonnes of 5% white rice for export as well as 499,068.51 tonnes of second-grade 100% Hom Mali rice, Pathum Thani rice, fragrant rice varieties and A1 special broken rice.

The government will also sell an additional 44,126.26 tonnes of Hom Mali paddy, local fragrant paddy and 5% white paddy kept since 2005.

Akarapong Dipavajra, director of the Foreign Trade Department's Rice Trade Bureau, said the tender was overwhelmed with a total of 30 bidders from rice millers and exporters.

Siam Indica, a subsidiary of President Agri Trading, submitted a bid to buy the entire amount of 210,660.9 tonnes of 5% white rice for export.

President Agri has a chequered past in the rice trade, including backing out of a 1.7-million-tonne bid in 2004 and accusations of fraud and embezzlement over 30,000 tonnes of rice in 2007.

Though no details of volume and price were unveiled, an industry source said the market price of 5% white rice is 17 baht a kilogramme, so bidders may offer 16.50 baht or lower while the pledging cost is 23 baht a kg.
If the government loses five baht per kilo or 5,000 baht a tonne, the sale of white rice will create a loss of about 1.05 billion baht.

For Hom Mali rice, the market price is 32 baht a kg while the pledging cost is about 40 baht a kg, which may cause the government to sell at a loss of up to 10,000 baht a tonne. Therefore, the whole amount of Hom Mali rice may create up to a 5-billion-baht loss, the source said.

The rice sale is the biggest since the state began stockpiling mountains of rice with the previous two pledging plans.

Bidders must offer 2% collateral of the rice value and are allowed to examine the quality of the rice at warehouses.

Mr Akarapong said it is the right time to call tenders because rivals India and Vietnam have low supplies.
Further auctions will be called in order to minimise the government's expenses for keeping over 10 million tonnes of rice. Government-to-government sales are also in process.

Mr Akarapong acknowledged the difficulty of government-to-government sales, with several countries opting for self-reliance and trying to produce sufficient rice for domestic consumption.

He cited Bangladesh, which has delayed purchasing Thai rice after its own cultivation showed healthy output.
Sompong Kittireanglarp, the president of Ponglarp Co, a big rice exporter, said the ministry should name the winners on the bidding day to ensure transparency.

"This will get rid of any rumours that some exporters receive favouritism from the ministry," he said.

Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, voiced similar concerns.

"This auction has been watched by the public largely to see whether the process will be transparent or not," he said. "It is curious to take three days in open bids. The bid outcome should be given on the same day."

Chaisiri Leesirikul, the managing director of KC Rung Ruang Rice Mill Co, which exports rice and sells bagged rice in the domestic market, said he is joining the bid to acquire about 3,000 tonnes of rice from a warehouse where he knows the owner well.

He said he is unconcerned about the quality but is still not sure that the offering prices, based on current market prices, will yield a positive outcome.

Source : Bangkok Post