Illustrative image. (Photo: thailand-business-news.com)

Bangkok (VNA) – The Thai government plans to issue bonds to raise 30 billion THB (961.8 million USD) for a project aimed at cutting the country’s rubber oversupply, according to a Thai agricultural official.

The Ministry of Agriculture is in discussion with the finance ministry over the process of bond issuance and the two are expected to reach a conclusion soon, said Minister of Agriculture Grisada Boonrach.

The ministry will use the fund raised from bond issuance to compensate farmers to encourage them to reduce supply. It will also be used to fund the Rubber Authority of Thailand (RAT)’s operation, the minister added. The RAT is responsible for overseeing the industry through regulating plantations, teaching farmers techniques to increase yield and intervention in the market if necessary.

This will boost the ability of government institutions to lend farmers, he noted.

The ministry looks to cut annual supply by as much as 1 – 3.3 million tonnes of rubber before year-end. The government previously compensated farmers for cutting down rubber trees in an area of around 64,000 hectares in an effort to cut oversupply and support rubber prices. But it failed to prop up prices.

The ministry believes that more comprehensive measures will be required to make rubber plantation more sustainable.

Thailand is the world's biggest rubber producer. In 2011, the price of unsmoked rubber sheets, which farmers sell to rubber factories, had fallen to 48 THB per kilogram, from a record high of 180 THB per kilogram. The target now is to push prices up to 80 THB.-VNA