By Apornrath Phoonphongphiphat
BANGKOK (Reuters) - Thailand's ruling military will develop a scheme to help rice farmers cover costs, a top officer said on Wednesday, in place of a scandal-plagued and costly price support program that helped drive the former prime minister from office.
Junta leader General Prayuth Chan-ocha last week had said the scheme of guaranteeing prices far above market levels would be scrapped, but had not indicated what would replace it.
The lack of a price subsidy will mark the first time in decades that the rice industry in Thailand, until recently the world's top exporter, will operate without direct state intervention.
On Wednesday, one of the generals in charge of the economy said a new scheme would offer soft loans to producers for fertilizer and other inputs and benefits for their families.
"We've not mentioned anything about compensation or money to be given to farmers," General Chatchai Sarikalaya, a member of the ruling National Council for Peace and Order (NCPO), told reporters after a meeting of senior economic officials.
"What we do plan is help to farmers to cut production costs and provide them with easier access to capital and soft loans."
The plan, he said, would be submitted to Prayuth.
World prices are on the decline in anticipation of what the United States Department of Agriculture says will be bumper crops in major producer countries, including India, Thailand and Vietnam.
Previous governments, regardless of political persuasion, allocated large sums of money to purchase part of the rice crop to keep prices artificially above market levels.
Keeping the large constituency of rice farmers happy is a priority for the military, which seized power on May 22, pledging to end six months of political turmoil. Discontent among rural residents could derail the junta's plans to restore order and nurse an economy teetering on the brink of recession.
The military has already handed out 92.4 billion baht ($2.86 billion) in payments to rice farmers that the caretaker government of ousted Prime Minister Yingluck Shinawatra had failed to disburse.
Thai common grade 5 percent white rice was offered at $390 per metric ton on Wednesday, up from a 2014 low of $370. That price was hit in early May, before the coup, when a caretaker government rushed to sell rice from state stocks to secure funds to pay arrears to millions of farmers.
Traders said the introduction of a new scheme would support prices.
"Prices are set to fall eventually on increasing supply, but they are unlikely to fall sharply," Charoen Laothamatas, head of the Thai Rice Exporters Association, told Reuters.
A Bangkok-based trader said prices were also supported by demand from traditional buyers - Indonesia, the Philippines and African and Middle East countries.
"Prices are unlikely to fall sharply as there are buyers out there. But there is also very little room for prices to rise as demand is not very strong," he said.
($1 = 32.3500 Thai baht)
(Editing by Ron Popeski and Michael Urquhart)