Commerce Ministry officials are lifted on a forklift to inspect the stock of rice at a warehouse in Pathum Thani province, central Thailand, on June 27, 2013. Thailand’s premier Tuesday, July 2, 2013, reversed a decision to cut the price it gives farmers for rice, a fortnight after stoking anger from its rural heartlands by announcing a 20 percent reduction in the fee. AP PHOTO/APICHART WEERAWONG
BANGKOK—Thailand’s premier Tuesday reversed a decision to cut the price it gives farmers for rice, a fortnight after stoking anger from its rural heartlands by announcing a 20 percent reduction in the fee.
The so-called rice-pledging scheme has dogged the government since its introduction shortly after Prime Minister Yingluck Shinawatra’s election victory in 2011.
Critics say the scheme is a costly sop to her government’s rural voters, is riddled with corruption and has caused the commodity’s price to surge—knocking the kingdom from its place as the world’s top rice exporter.
“The cabinet has endorsed the proposal… to adjust price for rice pledging scheme to 15,000 baht per ton,” she told reporters, restoring the price.
Two weeks ago her government slashed the rate by 3,000 baht, enraging farmers in Thailand’s impoverished but politically influential provinces.
More than 200,000 farmers had planned to sell some 2.9 million tons of unharvested rice at the 15,000 baht rate, the government said.
The sum would be paid until September 15, when the harvest is expected to be complete.
Yingluck earlier said she was “willing to help farmers but they must also be willing to help the government” stabilize the cost of the kingdom’s rice.
Thailand has paid its farmers around 50 percent more than the market value for rice since 2011 in an effort to boost incomes in the poor countryside who traditionally support the ruling party.
The government tries to sell the rice in world markets but faces stiff competition from rival producers such as Vietnam and India, and lost about 137 billion baht ($4.5 billion) from the scheme in the year to January.
Rice farmers welcomed the U-turn and dropped threats to hold protests that would have deeply embarrassed the government.
“We will not rally now,” Prasit Boonchoey chairman of The Rice Farmers’ Association told AFP.
But rice exporters reacted angrily to the decision, having struggled to sell expensive stockpiles of the commodity.
“It’s back to square one. There is nothing we can do… it is a political issue,” said Chookiat Ophaswongse, president of the Thai Rice Exporters Association.
International rice markets “are laughing” at the Thai government, he added.
This year Thailand is forecast to buy 22 million tons of the grain at a cost of up to 500 billion baht.
Since Thailand began buying rice at inflated prices it has been overtaken by both India and Vietnam as a global rice exporter.