Thailand may need fresh funds to keep rice scheme going

Wed Sep 25, 2013 3:08am EDT

* Govt has spent $21.3 billion on buying rice

* State stockpiles are huge, exact size in doubt

* Stocks amassed through costly intervention scheme

By Apornrath Phoonphongphiphat

BANGKOK, Sept 25 (Reuters) - Thailand may need to raise new funds for a rice buying scheme in the crop year from October as it has fallen behind schedule in repaying the state bank that runs the scheme, bank officials say, showing the government's failure to sell down stockpiles.

The government has been buying rice at prices way above the market since October 2011. The policy, aimed at helping poor farmers, has priced Thai grain out of export markets and cost Thailand its crown as the world's top rice exporter.

Luck Wajananawat, president of the Bank for Agriculture and Agricultural Cooperatives (BAAC), which funds the scheme, said the government had spent 667 billion baht ($21.3 billion) on buying rice since the scheme began.

The Commerce Ministry, which manages the rice scheme, has repaid only 139 billion baht to the BAAC, Luck was quoted as telling Thai newspapers on Wednesday, well short of the 220 billion the government aims to pay back by the end of the year.

"We are to finalise plans to borrow money to fund the scheme in the next few days," Luck was quoted as saying on the website of business newspaper Krungthep Thurakij, referring to the authorities' need to renew funding.

A senior official at the BAAC, who asked not to be named, confirmed the figures. "If the government wants to continue the scheme, it will have to borrow billions of baht more as its budget to run the scheme has run out," he told Reuters.

There was no immediate response from the government.

Prime Minister Yingluck Shinawatra has said the government was not considering further loans because it would have enough money from selling rice from its stocks to fund the scheme.

The cabinet has said it would spend no more than 270 billion baht for the scheme in the year from Oct. 2013 to Sept. 2014.

Early this month, Commerce Minister Niwatthamrong Boonsongphaisan said, "Since the cabinet has approved the budget of 270 billion baht for the scheme, it is the duty of the Finance Ministry to figure out how to get the money."

The BAAC source, who declined to be identified because of the sensitivity of the issue, said, "The Finance Ministry will need to guarantee another loan (from the BAAC) by the end of this month."

By the government's own admission, the scheme incurred losses of 136 billion baht in the 2011/12 crop year. Total losses depend on the prices paid for the grain, the volumes bought and sold and the price differentials. The government has published minimal data on all these aspects.

SCEPTICISM ON STOCKS

Deputy Commerce Minister Nattawut Saikuar said in June that stockpiles stood at 17 million tonnes.

On Sept. 12 Commerce Minister Niwatthamrong Bunsongphaisan said stocks had dropped to 10 million and the government had sold 1.2 million tonnes to China this month.

There has been no confirmation of that deal from China and the Thai government has given no further details.

As with previous claims of government sales, traders and industry officials will remain sceptical until they see evidence from port activity and export statistics.

The government has stopped publishing monthly rice export data since the intervention scheme started.

Data from the Office of the Rice Inspection Committee, part of the Board of Trade of Thailand, shows just 2.25 million tonnes exported in 2013 by Sept. 19, down from 3.47 million in the same period last year.

Thailand exported a record 10.6 million tonnes in 2011 but only 6.9 million in 2012 after the rice scheme drove up prices.

The United States Department of Agriculture has forecast Thai stocks would be 12.5 million tonnes by the end of 2013.

In a bid to cut the stockpiles, the government has said it would ease rules for future tenders, letting international trading houses take part, for example. It sold only 240,000 tonnes in three tenders in July and August, after offering 660,000 tonnes. ($1=31.3250 Thai baht)

(Editing by Alan Raybould and Clarence Fernandez)

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