Thailand Ends Controversial Rice Subsidy Scheme

BANGKOK —  Thailand's military government ended a rice price-support scheme, put in place under the former civilian government, as investigations continue into widespread corruption and losses of billions of dollars from the program.

The policy change comes as Thailand is predicted to return as the world's largest rice exporter, eclipsing the current market leader, India.

Thailand's military leader, General Prayuth Chan-Ocha, said all rice price-support schemes were dismissed unless they provided direct benefits to the farmers. Prayuth said alternative measures were needed to boost agricultural development and support to farmers.
Under the rice price-support scheme of former Prime Minister Yingluck Shinawatra, the government paid farmers 50 percent more than world market prices. The government believed the plan could make Thailand, then the world's largest rice exporter, a price leader and force up global rice prices.

The program was a central policy of Yingluck's government and key to the Pheu Thai party's 2011 election victory.

But the scheme, costing over $19 billion and shrouded in official secrecy, floundered as Thailand, unable to sell its rice at the higher prices, was left with millions of tons of the grain in warehouses, while the government was engulfed by allegations of widespread corruption.

Government financing for the scheme dried up last year, leaving hundreds of thousands of farmers unpaid.

About 20 farmers are alleged to have committed suicide because of financial distress, while others took to the streets in protest in Bangkok pleading for funds.

In March, Yingluck's caretaker government, in a bid to raise money, began releasing rice at discounted prices onto the world market.

Thailand's warehouses could be holding as much as 18 million tons of rice - double normal levels.

David Dawe, a senior economist with the United Nations Food and Agriculture Organization (FAO), said sales of Thai rice this year led to lower global prices.

"One of the ways that they were raising money is they realized that they were going to have to sell some of the huge stocks that they had," Dawe said. "They just couldn't continue to borrow money and sit on all these stocks and so they just started selling stocks. Thailand only went out of the market because they were trying to hoard everything."

Corruption charges

In early May, prior to the military takeover of the Thai government, the National Anti-Corruption Commission (NACC) found Yingluck at least partially responsible for corruption related to the scheme.

A subcommittee is examining the former prime minister's declared assets along with those of other cabinet members linked to the program.

Farmers from neighboring rice-growing countries, including Vietnam and Cambodia, were illegally shipping their rice to Thailand to be sold at the higher prices. Rice millers are also under investigation for overstating rice stocks.

The NACC is investigating losses of up to $16 billion, with almost 3 million tons of rice missing from warehouses.

Thai Rice Exporters Association honorary president, Vichai Sriprasert, said the military is now assessing the actual quantity of rice in warehouses.

"We address first the quantity - let's say the quantity, how many tons do we have? That hasn't been resolved yet. And after the quantity is resolved, to check the quality is much more difficult because the warehouse is full," Vichai said. "You cannot really go into the center of the warehouse. It's not possible to do that now - but once you know the quantity is correct, then the second stage would be to identify quality."

Currently, Vichai said Thai rice is the cheapest on the global market, as the country works to clear the backlog.

However, the outlook for Thai rice is optimistic.

The U.S. Agriculture Department said Thailand is forecast to be the largest rice exporter again by 2015, shipping almost 10 million tons - the highest since a record of 10.6 million tons in 2011 prior to the rice-price scheme.

Some information for this report provided by Reuters.