The government U-turn on rice-pledging prices has undermined its credibility and boils down to poor policy-making, experts say.
The National Rice Policy Committee (NRPC) Monday reversed its decision to slash the rice-pledging ceiling price and will continue to pay 15,000 baht a tonne for white rice until Sept 15.
In the South, the 15,000 baht pledging price will remain until Nov 30.
The decision was made at an NRPC meeting chaired by Deputy Prime Minister Kittiratt Na-Ranong. The recommendation will be sent to the cabinet for consideration on Tuesday.
An NRPC meeting chaired by former commerce minister Boonsong Teriyapirom on June 18 cut the pledging ceiling price from 15,000 to 12,000 baht a tonne for the current crop, effective from Tuesday, It also limited the pledging amount to no more than 500,000 baht a household.
The price cut came amid mounting criticism that losses from the scheme came to more than 200 billion baht.
It prompted farmers to stage a mass protest in Bangkok last week and hand the government an ultimatum, which would have expired, to review the cut.
Nipon Poapongsakorn, former president and now a distinguished fellow at the Thailand Development Research Institute (TDRI), said the reversal indicated how sloppy the government and the NRPC were in their policy implementation.
According to Mr Nipon, when slashing the prices the government cited financial discipline. Explaining the U-turn, the government claimed it had sufficient funds to buy 2.9 million tonnes from 200,000 registered farmers.
"The government must have had information about how much it could spend before it announced the paddy price cut. How come it came up with two different things?" he said.
Mr Nipon said the U-turn would badly undermine the government's credibility.
A rice exporter was also astonished at the sudden change.
"We don't know where prices should be now. We may have to wait until the dust settles before offering prices again," Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association told Reuters.
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"But what we know for sure is that this government has no credibility at all."
Mr Kittiratt said the situation has now changed. "The government is quite sure to have enough money to buy the 2012/2013 second crop rice estimated at 2.9 million tonnes from the 200,000 farmers who have registered to sell rice to the government," he said.
The government has spent 345 billion baht on 22 million tonnes of rice from the first and second crops from 2012/2013 based on the pledging price of 15,000 baht a tonne.
There is still room in the approved budget of 500 billion baht, he said.
The NRPC kept the 500,000-baht maximum pledge amount for each farming household, Mr Kittiratt said.
Thai Agriculturist Association president Wichian Phuanglamjiak welcomed the reversal. He said it was the right decision and farmers will meet Ms Yingluck Tuesday to express their support.
New Commerce Minister Niwatthamrong Bunsongphaisan said the government is committed to the rice-pledging policy.
On his first day at work Monday, Mr Niwatthamrong said his mission at the ministry is to release the government's estimated 17 million tonnes of rice stocks as quickly as possible.
Mr Niwatthamrong admitted Thai rice could not compete on the world market because the government hadset its buying prices too high — 15,000 baht a tonne for white rice and 20,000 baht a tonne for fragrant rice.
The price of 5%-grade white rice last week was US$522 a tonne, compared with $365 quoted by Vietnam and $445 by India.
"Without the pledging project, farmers will receive even less from the sale of their rice because Vietnam is selling its rice at a very low price while India has turned to exporting more."
New Deputy Commerce Minister Yanyong Phuangrach said the ministry has an urgent plan to release 4 to 5 million tonnes of rice from the pledging stockpile within three months.
He said the ministry is confident it will hit its target of selling 8-8.5 million tonnes of rice this year. He expected to make 72 billion baht from the sale of the stored rice this year.