April 30, 2014 / 7:21 AM / in 4 years

Farmers' fund fails to make a dent on Thai govt rice debt

* Rice arrears brought down to 90.5 bln baht from 119 bln

* Govt raises just 9 pct of funds needed

* Time running out to sell stocks and replenish budget

By Apornrath Phoonphongphiphat

BANGKOK, April 30 (Reuters) - Efforts to raise cash to pay Thai rice farmers under a state subsidy scheme have had little success, officials say, adding to the woes of the country’s caretaker government as it struggles to sell down a rice stockpile.

The Thai government has raised about 9 percent of what it owes from a so-called “fund to help farmers” that was launched earlier this month, seeking both public donations and investments that would offer investors a modest return.

“We’ve raised around 8 billion Thai baht ($250 million) from the new fund,” said Nipath Kuasakul, executive vice-president of the Bank for Agriculture and Agricultural Cooperatives (BAAC), which manages the intervention scheme for the government.

But that is just a small portion of the 90.5 billion baht owed to farmers under the rice subsidy scheme that has incurred billions of dollars in losses and left hundreds of thousands of farmers unpaid.

The government of Yingluck Shinawatra was swept to power in a landslide in 2011, helped by the generous rice price guarantee scheme, which effectively ended on Feb 28. However, Shinawatra has faced months of protest over a deep-seated political divide and an election in February was annulled.

She now heads a caretaker government with limited fiscal powers and cannot borrow money to pay the farmers.

The debt to farmers has fallen from 119 billion baht earlier in the year after the caretaker government was authorised to take money from the state budget and sold rice from stockpiles, managing to repay some farmers as tempers frayed.

The government has struggled to sell large quantities of the stockpiled rice, which it bought a prices well above market levels.

The BAAC has tried to raise cash by persuading local government bodies to deposit money with the fund, but critics and opponents say such an investment would be risky.

“It’s like you are taking the central budget set aside for rural development to spend on such a risky programme, which would put the country’s fiscal discipline at risk,” said Nipon Poapongsakorn of the Thailand Development Research Institute.

The government borrowed 20 billion baht from the 2013/2014 fiscal budget in late March to pay farmers to try to avert mass farm protests, a separate front from the political demonstrations it has faced for the past six months.

That loan, authorised by the Election Commission, was made available on condition the government repaid the money to the central budget by May 31.

Finance Minister Kittirat Na Ranong said the government had already returned 15.4 billion baht and the Commerce Ministry was racing to sell stocks to generate the remaining 4.6 billion.

The government could face a legal charge if the money is not repaid on time, although sources said it would likely get an extension.

The Thai government spent more than 600 billion baht ($18.6 billion) buying rice from farmers at 15,000 baht per tonne - about 50 percent above market prices when it proposed the figure in the run-up to a 2011 election - and it held the grain in stocks in an effort to push up world prices.

However, abundant supplies in Asia and a return to exports by India scuppered the plan and led to a sharp fall in exports from Thailand, the world’s biggest shipper of the grain in 2012.

The intervention scheme ran up massive losses, the full extent of which has not been disclosed to the public.

Yingluck also faces possible Senate impeachment and may have to step down if an anti-graft panel decides she is guilty of dereliction of duty in her handling of the rice scheme. ($1 = 32.2300 Thai Baht) (Editing by Martin Petty and Richard Pullin)

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