Govt to cut sugar and cane subsidies to save public funds

The government may reduce subsidies for sugar and cane farmers later this year in a bid to curb public spending, Prime Minister Abhisit Vejjajiva says.

Mr Abhisit yesterday said he supported the findings of a study by the Thailand Development Research Institute (TDRI) which recommended that subsidies for cane and sugar be altered later this year when the Cane and Sugar Fund should be free of debt.

This would allow the government to cut its spending by reducing the level of assistance to farmers.

The study showed that subsidising the sugar industry had resulted in significant costs to the public purse.

The study also examined the impact of subsidising products such as rice, tapioca, longan, rubber and dairy goods.

The combined subsidies cost the government about 70 billion baht a year. The sugar and cane sector accounted for about 12-16 billion baht per year.

The cane and sugar industry has not followed market demand for three decades as the government developed a quota system to allocate supply for the domestic and export markets. The Cane and Sugar Fund was also set up to provide financial assistance to farmers.

The subsidies drive the industry's growth by lifting yields and total sugar output, which has risen to 80 million tonnes from 20 million over 30 years.

But they also distorted the market and resulted in the fund being mired in debt as farmers failed to pay back loans.

TDRI president Nipon Paopongsakorn said a scheme like the new price insurance scheme used with maize and tapioca crops should replace sugar subsidies.

"It [a price insurance scheme] will help reduce the burdens on all related parties including farmers, as well sealing loopholes for corruption," said Dr Nipon.

More than 400,000 farmers are signed up with the maize price insurance scheme, compared with the 80,000 who benefited from the previous subsidies. More than 400,000 tapioca farmers also benefit from the new programme compared with 250,000 previously.

Rice farmers engaged in the government programme trebled to about 3 million once the insurance scheme was implemented. But despite this surge, government expenditure fell to 30 billion baht from the 70-80 billion baht it paid in subsidies each year.

Under previous rice subsidies farmers pledged paddy at authorised millers at prices set by the government. But market prices rarely exceeded those set by the government, leaving the state with huge rice stockpiles.

The new options plan minimises state expenditure and ensures farm incomes are supported.

Farmers register with the scheme when a benchmark price for paddy and guaranteed minimum prices for farmers are set. If the benchmark price is lower than the price guarantee, farmers will be compensated for the difference.

Mr Abhisit, speaking yesterday at a seminar organised by the National Anti-Corruption Commission on government intervention in farm products and anti-graft measures, pledged to invest in an IT system to gather data in order to help prevent corruption.

source: bangkokpost