Bank of Thailand chief urges sale of rice from govt stockpiles to fund payment to farmers

The central bank governor yesterday advised the caretaker government to raise funds by speeding up the sale of rice from the state's stockpiles instead of borrowing to pay farmers taking part in its rice-pledging scheme.

Prasarn Trairatvorakul, governor of the Bank of Thailand, said the pledging scheme had created problems for farmers because they were not being paid and they suffered badly from lack of savings.

"The government should sell rice from the stockpiles as soon as possible ... even if the sales are made at a loss," Prasarn said.

More than a million farmers have not been paid for their pledged paddy in the 2013-14 harvest season, representing 10.71 million tonnes worth a total of Bt167 billion. The farmers have threatened to block roads and stage protest rallies against the government because of the delay in payments.

After the Finance Ministry on Thursday failed to obtain a Bt20-billion short-term loan in the first batch of the Bt130-billion fund planned to finance the rice-pledging project, TMB Bank was reportedly named as the winner of the bid. However, the ministry said none of the financial institutions had won it.

TMB Bank chief executive officer Boontuck Wangcharoen clarified in a statement released yesterday that the bank did not take part in the loan bidding on Thursday.

"The legal risk is not clear. So the process of credit has not yet been considered as more than half of the bank's directors, who are foreigners, are abroad," Boontuck said in a statement.

Kosit Panpiemras, executive chairman of Bangkok Bank, said it did not take part in the loan auction on Thursday, as the law regarding the loan was still unclear. He said commercial banks had to be careful on such matters.

Narongchai Akrasanee, chairman of MFC Asset Management, suggested that the next government should expand the revolving fund for paying for paddy under the scheme once they are in power. Then they can begin to pay the farmers gradually through any banks that are willing, and not only the Bank for Agriculture and Agricultural Cooperatives.

Prasarn said the problem faced by commercial banks in the auction related to the law, which is still unclear, and they were worried that the next government might not honour the deal. However, he said the BOT would not interfere, as it believes commercial banks can deal with it.

Meanwhile, caretaker Commerce Minister Niwatthumrong Boonsongpaisan said China had expressed concerns about the Thai government's ability to supply rice to it under a government-to-government contract. China could cancel the deal. He said that next week he would discuss the matter with the Chinese company involved.

In January, the government sold 1 million tonnes of rice from its total stockpile of 10 million tonnes. There are sales contracts for another 5 million tonnes, which are awaiting shipping.