TCC takes aim at rice secrecy

Private sector urges transparent sales

Businesses are calling on the state to scrap secret sales of rice stocks and return to the common rice auction that generated much lower losses.

Isara Vongkusolkit, chairman of the Thai Chamber of Commerce (TCC), yesterday said the government's existing selling practice has proved inefficient.

The government itself recently accepted it posted losses of 136 billion baht from rice pledging during the scheme's first year, as originally reported by a Finance Ministry panel.

The loss of 136 billion baht is based on all expenses in the rice pledging scheme in its first year _ the 2011-12 crop year _ including management costs, interest expense and the estimated value of remaining rice stocks.

The calculated price was based on the lowest market price on the closing date of Jan 31.

In the scheme's first year, the state spent 352 billion baht on 21.7 million tonnes of rice.

The value of the remaining rice stocks is estimated at 156 billion baht, while sales of pledged rice are estimated at 59.2 billion baht. Total losses are thus 136 billion baht.

The Rice Policy Committee has not put a figure on losses for the second year _ the 2012-13 crop season _ but the Finance Ministry panel estimated first-crop losses for the second year at 84 billion baht.

"We're gravely concerned about the rice pledging scheme, be it about the buying and selling figures, state rice stocks, actual profit/loss figures and potential future losses that are still kept confidential," said Mr Isara.

"This ambiguity is shaking the confidence of the public and businesses and will eventually affect the country's credit rating and the cost of government and business borrowing."

He said the pledging price offered at a premium to market prices also weakens Thai rice exporters, while rice packers who want to develop their own brand in foreign markets are also less competitive.

The TCC fully agrees with the government's policy of raising income for poor farmers, only without market distortions, said Mr Isara.

It has suggested the state buy through the rice pledging scheme at market prices, allow only the harvest from the first crop to be pledged and limit the amount of participating rice per family based on cultivation area and average annual productivity.

Farmers in irrigated areas who can grow rice two or three times a year have relatively high productivity of 600-700 kilogrammes a rai, while those relying on annual rainfall produce about 400 kg per rai.

"In a sustainable move to help farmers, the government should earmark funding to promote production efficiency and reduce production costs, be it through procurement of water reservoirs, fertiliser, rain varieties or farmland consolidation," said Mr Isara.

"The government should also pay more attention to rice zoning and clearly classify rice quality and rice varieties in each cultivation zone. More importantly, the release of rice stocks should be made transparent, open and competitive."

In related news, the TCC yesterday agreed to appoint vice-chairman Vichai Assarasakorn to head a panel that will closely monitor the rice pledging scheme.

Mr Vichai said the state's rice disposal is a key area of concern, as rice stocks will be subject to losses in terms of both quality and price if they are kept stockpiled for too long.

The government is also saddled with high costs from interest expense and management fees, he said.

"Secret selling and government-to-government deals are inefficient, as shown by the government selling only 59 billion baht worth of rice through such sales," said Mr Vichai.

About the author

Writer: Phusadee Arunmas
Position: Business Reporter