Deputy finance permanent secretary Pongpanu Svetarundra said the ministry had sent a letter to all 32 commercial and state-owned banks inviting them to participate in loans for the first batch of 50 billion baht in advance payments to farmers who pledged their paddy under the rice-pledging scheme for the 2013-14 main crop.
The National Council for Peace and Order (NCPO) at the weekend gave approval to the Finance Ministry to borrow and guarantee bond issuance by the state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) worth a combined 92.4 billion baht to pay 858,000 rice farmers.
All farmers are expected to receive their payments by next month.
The military junta has authority to borrow fresh funds to pay farmers who have been waiting for their money for months.
Somchart Soithong, director-general of the Internal Trade Department, recently said the BAAC had already set aside 40 billion baht to pay the rice farmers, and the remainder would be acquired through loans from other financial institutions as soon as possible.
The rice-pledging scheme was the key populist policy initiated by the former Yingluck Shinawatra government with the aim of boosting farmers' incomes and raising the market price of rice.
However, the scheme backfired due to hefty losses when the pledging price was set at 40-50% higher than market prices.
Moreover, the former government's caretaker status limited its ability to borrow to pay farmers, while the Commerce Ministry's sales could not generate sufficient revenue to settle the debt.
In the 2013-14 main crop, 11.6 million tonnes of paddy worth 190 billion baht were pledged under the scheme. Farmers who pledged 6.29 million tonnes of paddy worth 103 billion baht were paid.
Out of that total, 75 billion baht came from rice sold to the market by the Commerce Ministry, 1.05 billion from the Farmers Aid Fund and another 20 billion from the government's central budget.
Meanwhile, the chief of the Commerce Ministry has denied a report alleging that more than 3 million tonnes of rice disappeared from state warehouses.
Commerce permanent secretary Srirat Rastapana said the ministry would suspend sales of rice in the stockpile to traders for at least a couple of days to allow intensive stock checks.
However, delivery of rice under government-to-government contracts will continue.
A report by an investigation subcommittee set up by the Finance Ministry showed that the Commerce Ministry could not locate as much as 3 million tonnes of rice.
The rice scheme, run since October 2011, has purchased 43 million tonnes of paddy from farmers, but the buy-high-sell-low scheme is expected to result in losses of more than 500 billion baht amid allegations of corruption, said a Finance Ministry source.
The NCPO last week was informed there were about 18 million tonnes of rice in stock. It ordered commerce officials to check the exact amount.
BAAC president Luck Wajananawat said the second crop had begun in several provinces even though the former government attempted to encourage them to shift to other crops. As a result, nearly 10 million tonnes of rice will enter the market at low prices without the price subsidy.
“Even though the second crop will end in September, the government still needs longer to find out which measures should be imposed to boost market prices in times of oversupply. The price has dropped to about 8,000 baht per tonne for high-quality rice, while high-humidity grade will sell at only 6,500 baht,” said Mr Luck.Timeline for the scheme
- The Yingluck Shinawatra government started rice pledging in October 2011 by agreeing to pay 15,000 baht a tonne for paddy.
- The scheme was heavily criticised by economists because it pledged rice at 40% above the market price. Milled rice reached as high as 24,500 baht or US$790 a tonne compared with $510-550 a tonne in 2010.
- Thailand struggled to find buyers, and its export volume fell by 35% to 6.9 million tonnes in 2012 as India and Vietnam eclipsed Thailand’s sales.
- At the end of last August, traders and economists projected stockpiles could reach 17-18 million tonnes of milled rice, but the government said the figures were a “business secret”.
- Criticism intensified after an investigation by a senior Finance Ministry offical, Supa Piyajitti, was released in July 2012 revealing the rice scheme incurred losses of more than 200 billion baht.
- During a censure debate in November 2012, the Democrat Party accused the government of negligence and allowing corruption at every stage of pledging.
- In late 2012, the Democrat Party called on the National Anti-Corruption Commission (NACC) to investigate irregularities in the rice pledging scheme and impeach Ms Yingluck, as she chaired the National Rice Policy Committee.
- Early this month, the NACC indicated Ms Yingluck was guilty of negligence in rice pledging fraud and voted to bring impeachment proceedings against her.