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Thai rice woes rebound on crisis-hit government

Angry farmers, a rice mountain and a slew of corruption allegations -- a flagship policy that helped propel Thailand's premier to power now threatens to boomerang on her embattled government.

BANGKOK: Angry farmers, a rice mountain and a slew of corruption allegations -- a flagship policy that helped propel Thailand's premier to power now threatens to boomerang on her embattled government.

Prime Minister Yingluck Shinawatra is struggling to steer the Southeast Asian nation through a policy vacuum created by a chaotic general election earlier this month.

A controversial rice subsidy scheme, which paid farmers up to 50 percent above market rates, helped her sweep to power in 2011 but now appears to be unravelling.

Critics say the programme has incubated massive corruption, drained the public finances, dislodged the kingdom as the world's top rice exporter and created an estimated 18-million-tonne stockpile of the grain.

Hundreds of farmers have protested recently in Bangkok to demand payment after the government ran short of cash to buy their pledged crops late last year, adding to pressure on Yingluck, who has faced months of opposition rallies.

The cabinet earmarked nearly $22 million Tuesday for about 3,900 farmers but, in a sign of the policy constraints it faces, the payments must be approved by the Election Commission.

An estimated one million farmers nationwide are owed money, according to the Thailand Development Research Institute, which says the government may need to find $3.6 billion to catch up with payments.

Thailand sought to recoup the money paid to farmers by hoarding rice to drive up prices on world markets, but it was unable to find buyers after rival producers such as India and Vietnam unexpectedly boosted their shipments.

The Thai Rice Exporters Association forecasts the kingdom will sell 7.5 million tonnes overseas this year, down more than 30 percent compared with 2011.

"The whole Thai rice industry fell apart and the reputation it had enjoyed in the world market as a reliable supplier of good quality rice is gone," said TDRI's Ammar Siamwalla.

The government has not revealed the exact annual cost of the scheme, but the TDRI says estimates range from $4.6 billion to $6 billion -- roughly six-eight percent of the annual budget.

The ruling Puea Thai party denies the government has run out of money and has defended the scheme as an effort to lift rural Thais out of poverty.

Yingluck blames opposition demonstrators -- who disrupted the February 2 election -- for leaving her caretaker administration with limited power to raise funds.

Until voting is held in dozens of protest-hit constituencies, there are not enough MPs to appoint a new government even if Yingluck's party wins.

"We are trying to solve the problem as best we can... but the banks will not approve loans," Yingluck told reporters on Tuesday.

"The government's financial and monetary status is good."

A deal to sell one million tonnes of stockpiled grain to a Chinese state firm recently collapsed after a Thai anti-corruption panel announced graft charges against several government officials linked to the scheme.

The National Anti-Corruption Commission (NACC) has launched a probe into possible negligence of duty by Yingluck in connection with the flagship policy -- a move that could potentially result in her impeachment.

Opposition politician Warong Dechgitvigrom, who submitted the graft complaint to the NACC, alleges that the scheme lured many mills to increase their inventory with sub-standard grain from Cambodia and Myanmar.

Warong said he had evidence that fabricated deals -- purportedly to sell rice to overseas governments -- enabled local shell companies to buy rice at bargain prices from the scheme to re-sell on the domestic market at the expense of taxpayers.

"Every process within the rice scheme has been corrupt," he told AFP.

"The farmers are poor... exports have collapsed and the quality of Thai rice is bad," added Warong. "I think this is near the end for Yingluck."

Voters in the northeastern region of Isaan, home to a third of the population, have helped bring three successive governments backed by Yingluck's billionaire family to office -- the first in 2001 led by her elder brother Thaksin.

Failure to pay farmers could erode that "traditionally arch-loyal rural base", said Paul Chambers, director of research at the Institute of South East Asian Affairs at Chiang Mai University in northern Thailand.

But the impact on the government's popularity remains unclear.

In the northeastern province of Udon Thani, farmer Mali Khampimaan blamed the opposition demonstrators for the $750 she is owed for rice delivered in November.

"The banks won't pay because of the protests," said Mali. "But we still need the money."

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