BANGKOK, Feb 05, 2014 (AFP) - Thailand's embattled government on Wednesday defended a much-criticised rice subsidy scheme after a Chinese firm cancelled a one million tonne order for stockpiled grain, following a graft probe into Thai officials.
The populist scheme, which paid farmers above market rates for rice, has become a lightning rod for anger among anti-government protesters who say it has engendered widespread graft, punched a hole in Thai public finances and dislodged the kingdom from its position as the world's top rice exporter.
Disrupted elections last Sunday have failed to ease the pressure on Prime Minister Yingluck Shinawatra, with experts saying a series of legal moves - including one over the rice policy - threaten to erode her authority and potentially bring down her government.
The collapse of the Chinese deal was announced by Thailand's Commerce Ministry on Tuesday following charges by the kingdom's anti-graft body against Thai officials including a former minister.
Defending the rice scheme, Yingluck told reporters on Wednesday night that "everyone is trying to help farmers".
Rice farmers from the central provinces have threatened to march on the commerce ministry in Bangkok on Thursday in protest at lack of payment for the crops they pledged to the scheme.
"The government was trying its best to keep its monetary discipline... we all sympathise with the farmers who suffer (from late payments)," Yingluck said.
Current Commerce Minister Niwatthamrong Boonsongpaisal tried to calm fears Thailand is unable to shift its vast rice stockpile - estimated at nearly 20 million tonnes - saying a separate deal with the Chinese government still stands.
Populist policies
"The contract for one million tonnes is separate and they (China) said they will still buy Thai rice," he told AFP, adding the government will soon auction off another 400,000 tonnes of its rice inventory.
It desperately needs the money to pay farmers across the country for rice they have pledged for the scheme - one of a series of populist policies under Yingluck's administration.
Instead of driving up global prices for the commodity, the scheme led buyers to turn to India and Vietnam, leaving Thailand with a rice mountain.
The government blames three months of demonstrations on Bangkok's streets for derailing the scheme, with Yingluck saying her administration's powers have been limited after the dissolution of parliament in December.
It has been reluctant to reveal the full cost of the scheme or the exact size of its rice stockpile.
But firebrand protest leader Suthep Thaugsuban seized on the collapse of the Chinese deal as another sign of rot at the heart of the subsidy scheme, which opponents say amounted to massive vote-buying by the Shinawatra clan in its rural base.
"They will take more than three years to sell 18 million tonnes of rice," he said.
In January the National Anti-Corruption Commission opened a probe into possible negligence of duty by Yingluck in connection with the rice scheme.
The panel said it would consider whether she had violated criminal law, but did not say what punishment she could face if found guilty.
The panel will charge 15 other people, including a former commerce minister, with corruption over the policy.
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