Close supervision of rice mortgage scheme
to ensure benefit for poor farmers
By Jon Fernquest |
In Sunday's Bangkok Post, Chulalongkorn University economist Narong Petchprasert took a closer look at government plans to support the price of rice.
The main problem is the programme will come too late because most farmers have already sold most of their rice stocks.
For this reason, the programme may only benefit rice millers and other middlemen who act as canvassers for politicians.
Close supervision of the programme and inspection by government officials will be essential if the programme is to actually help farmers:
"Under the scheme, the government is handing state money to millers, so that millers could buy paddy from farmers and keep it in their warehouses without any inspection by government officials...
A better way for the government to help poor farmers would be to give them the capability for storing rice for long periods of time, rather than being at the mercy of whatever the market price happens to be at harvest time:
"To prevent rice and paddy price manipulation in the long run, Mr Narong suggested the government build state paddy warehouses around the country to lend farmers space to store their paddy."
Of course, this doesn't solve the problem of farmers being hard up for cash at harvest time to pay back their debts, a problem might be solved by farmers pooling resources in agricultural cooperatives.
Some rice millers are also calling for a government blacklist barring millers who have been found guilty of corrupt business practices in the past from the rice support scheme.
Here is the article in full:
Government's rice scheme questioned
Mortgage plan is flawed, says economistBy Post reporters
Sunday June 08, 2008
Benefits for farmers from the rice mortgage scheme urgently designed by the government to end a road blockade threat amid anger about decreasing prices are in question.
Chulalongkorn University economist Narong Petchprasert called the government's programme, which it is set to implement next Sunday to shore up paddy prices, a belated measure and said it was likely to benefit only millers and middlemen, many of them politicians' canvassers.
With paddy from second-crop farming harvested in May and no storage space of their own, most farmers had already sold their paddy at low prices, said Mr Narong, who studied the issue and found that seven out of 10 millers were linked to local politicians.
So far most second-crop farmers only have a small volume of paddy left to join the government's mortgage scheme, he added.
Mr Narong warned of possible corruption by millers, middlemen and even officials because of no measures to make sure the money set aside by the government for the programme will be efficiently used to achieve the goal.
Without prudent supervision from officials, millers could take paddy from farmers and pay them lower than the government's mortgage rates, then enjoy the margin, he added.
While the government would guarantee the price of paddy with 15% moisture at 14,000 baht per tonne, millers could claim the moisture in farmers' paddy exceeded that percentage and pay them much lower than the guaranteed price. Millers could then get 14,000 baht a tonne for the same paddy from the government's mortgage scheme, according to Mr Narong.
"Under the scheme, the government is handing state money to millers, so that millers could buy paddy from farmers and keep it in their warehouses without any inspection by government officials," he said.
To prevent rice and paddy price manipulation in the long run, Mr Narong suggested the government build state paddy warehouses around the country to lend farmers space to store their paddy. It would enable farmers to keep their paddy while waiting to sell it at preferable prices, he added.
The scheme announced last Wednesday will be run by the Bank of Agriculture and Agricultural Cooperatives, under the Finance Ministry.
Rewat Saengnil, a miller in Saraburi, said he agreed with Mr Narong that the scheme came too late, even though the guaranteed prices are satisfactory.
He said the government should not allow any miller to accept especially high volumes of mortgaged paddy. The volume of mortgaged paddy via each miller should be capped at between 2,000 and 3,000 tonnes, in order to spread the risk of damage.
Mr Rewat added there are both honest and corrupt millers, and the government should blacklist those who have been found to be corrupt and bar them from the scheme.
"I don't know why they allow corrupt millers to join the scheme," he said.
But Chaiyaporn Prompan, an award-winning farmer from Suphan Buri's Bang Pla Ma district, welcomed the scheme, saying although it is coming a bit late, it is better than nothing.
Mr Chaiyaporn said he, too, had sold most of his paddy, but expected the new paddy next July to fetch higher prices under the mortgage scheme.
"With the scheme, millers and middlemen can't push down paddy prices as much as before," he added.
In an attempt to make the scheme truly benefit farmers, Agriculture Minister Somsak Prissananantakul recommended mortgage scheme operators to group provinces into different mortgage zones and allow farmers to mortgage their paddy via any millers in their zones.
His suggestion was intended to give farmers a wider choice of millers in the mortgage scheme.
Mr Somsak said in the past farmers were allowed to mortgage their paddy with millers in their province only, giving local millers the chance to exploit them.
(Source: Bangkok Post, front page, 08-06-08, temp-link)
Vocabulary:
a capability - the ability to do something successfully
X at the mercy of Y - X cannot protect themselves from Y, prevent from being harmed by Y
price manipulation - control market prices for personal gain (See glossary)
hard up for cash - need cash very badly, need money in their hand to pay bills and debts
pooling resources - when many people collect together resources to solve a problem
agricultural cooperatives - groups of farmers cooperating on marketing their crops after harvest (See Wikipedia)
flawed - has a mistake or imperfection (which makes it less valid and useful)
urgently - needs to be done, as soon as possible
a road blockade - when people block a road, not letting cars pass (for example, protesters)
implement - putting aplan into action, executing a plan, making sure that something that is planned actually gets done (See glossary)
shore up paddy prices - strengthen and support something weak and failing
belated measure - actions to solve a problem, taken too late
politicians' canvassers, vote canvassers - people who work closely with politicians to help them get votes to get elected to government office
millers, rice millers - companies that process rice (dehusking, drying) so that it can then be either; 1. stored, or 2. packaged and sold in stores
middlemen - buyers and sellers of goods and services located between producer ans consumer (See glossary)
set aside - keep for a special future use (See glossary)
prudent - being careful and using good judgement (See glossary)
supervision - managing people doing a task, checking to see that if it is done correctly, overseeing a task
prudent supervision - carefully managing people doing a task, using good judgement in supervision
margin, profit margin - profit, difference between price and cost of producing a product, usually expressed as a percentage of sales (See glossary)
guarantee - promise that something will happen (See glossary)
guarantee the price - a promise that they will receive this (high) price
the government mortgage scheme - a government programme of intervention and price support in rice markets, farmers give their rice to government in exchange for a price when prices are temporarily low, they either pay the money and take back the rice, or they keep the money and the government is left with the responsibility of selling the rice at a reasonable price
preferable prices - like these prices better than other prices
capped - an upper limit set, that it cannot go beyond
spread the risk - when more people are responsible for the risk (paying part of the money when there is a bad outcome and a loss of money)
blacklist (noun) - a list of people who have done something wrong and cannot be trusted
blacklist Y (verb) - putting person Y on a blacklist
bar them - prevent them from participating, from entering the programme
fetch higher prices - purchased at a higher price
zones - areas within a place
X intended to Y - X was done in order to cause Y
exploit - use unfairly for one's own gain (See glossary)
