Preferential loans for agricultural production target wrong subjects

26-May-2012 Intellasia | TBKTSG | 7:01 AM Print This Post

The government has been urged to stop providing preferential loans to enterprises to help them collect rice from farmers, because the programme does not help agricultural production.

The policy aiming to protect farmers

In principle, the government initiated programme on providing loans with preferential interest rates (sometimes at zero percent) to exporters, so that they can collect rice from farmers, aims to protect farmers’ benefits from the rice price fluctuations.

The policy makers believe that with the preferential loans, exporters can pay reasonable prices for rice and ensure reasonable profits for farmers. Besides, exporters can take initiative in their business plans and they would only sign export contracts when the world’s prices are high.

However, in fact, farmers, the main subject of the programme, have not got benefited from the programme at all.

According to Dr Vo Tong Xuan, President of the Tan Tao University in Long An province, the Vietnam Food Association VFA told the government that they need preferential loans to collect rice to help farmers clear stocks. However, in fact, VFA’s member enterprises collect rice to store for their benefit, not farmers’ benefits. Once they can export at higher prices, farmers would not be able to share the higher profits.

Therefore, an agriculture expert in Mekong Delta, believes that instead of providing loans to enterprises to help them store rice, the government should address the preferential loans to farmers, so that they can develop production and pay debts.

Xuan thinks that it would be better if the state gives money to farmers and cooperatives – the organisations that represent farmers.

“If a cooperative says it would have 1000 tonnes of rice this crop, the government should give it the sum of money equal to the value of the 1000 tonnes or rice, so that farmers and pay debts and keep the rice in stocks and only sell rice at good prices. When the rice prices go up, farmers would sell the 1000 tonnes of rice and pay back money to the State,” Xuan explained the model he suggested.

If so, it would be farmers who can benefit from the programme. Meanwhile, if money is given to enterprises, they would never share profits with farmers,” Xuan said.

Enterprises would go bankrupted?

VFA has informed that by early May 2012, Vietnam had signed the contracts on exporting 4.5 million tonnes of rice with the export prices ranging from 380 dollars to 467 dollars per tonne.

Also according to VFA, the total inventory volume of enterprises is estimated at 2.4 million tonnes. If noting that the contracted export volume is 4.5 million tonnes and the delivered volume of 1.8 million tonnes, enterprises still lack 300,000 tonnes.

Meanwhile, Dr Le Van Banh, Head of the Mekong Delta Rice Institute, said he heard from VFA that the total storage is 1.5 million tonnes. If so, enterprises lack 1.2 million tonnes, not 300,000 tonnes as announced.

Ngo Ngoc Yen, the owner of Yen Ngoc rice agent in Tan Phu district of HCM City, said five percent broken rice is priced at 8600 dong per kilo, while 25 percent broken rice at 7800 dong per kilo.

Meanwhile, a rice exporter in Dong Thap province has revealed that enterprises would have to pay 300-400 dong per kilo more for other expenses, including the bank loan interest rates, packaging, transport fee.

As such, if the figure released by VFA is accurate (2.4 million tonnes in stocks, lacking 300,000 tonnes), this means that VFA’s members could collect rice at low prices before, and they are not likely to take a loss.

However, if the figure was just “virtual,” it is very likely that enterprises would take loss which may lead to bankruptcy.


Category: Finance

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