The baht's strengthening is causing the Commerce Ministry to fear that it will miss its target for returning money to the Finance Ministry by selling government rice from the pledging scheme.

"The price of Thai rice has been rising mainly due to the stronger currency compared to other rice exporting countries. Importers have turned to ordering from Vietnam and India, whose prices are much lower," a ministry source said last week.

After the baht appreciated to 28-29 to the US dollar, the government has to consider carefully its plan to release rice from stockpiles through auctions for private exporters, as fewer bidders could attend them due to the small orders for Thai rice.

The ministry is also afraid that it would need to renegotiate its government-to-government contracts with many countries because the price has changed due to the exchange rate.

Thailand could miss some export orders because of the high price, the source said.

Thailand has signed G-G deals for 7.32 million tonnes of rice with buyers such as China, Bangladesh, Indonesia, South Korea, Nigeria and other countries in Africa.

INCOME DECLINE

Although Thailand can supply the volumes under the G2G contracts, it will earn less income due to the dearer baht, the source said.

"The ministry would be unable to return a total of Bt180 billion to the Finance Ministry this year because of the lower return in baht terms," the source said.

The Finance Ministry has approved a loan to the Commerce Ministry to continue the rice-mortgaging project. The Commerce Ministry has promised to gradually pay the money back to the Finance Ministry.

However, Commerce Minister Boonsong Teriyapirom said the government has adequate funds to carry out the scheme, despite lower cashflow to the Finance Ministry.

The Commerce Ministry has already returned Bt80 billion in the fourth quarter of last year and about Bt40 billion in the first quarter of this year, he said.

The ministry is planning to unload rice from its inventory soon, but needs to ensure that the sale would not affect normal rice trading, he added.

The ministry's schedule to repay Bt149 billion to the Finance Ministry by September is Bt14.11 billion in March, Bt12.62 billion in April, Bt13.46 billion in May, Bt13.06 billion in July, Bt10.9 billion in August and Bt11.42 billion in September.

Source: The Nation