The rice committee is working on a new proposal to rescue the rice industry, which will require minimal government intervention and not the $9 billion bail out as proposed originally.

The new proposal, if agreed to by the banking sector, will see the latter taking full responsibility for the $16 billion debt by the rice sector.

What the rice committee is working on, is to have the government provide the fiscal incentives necessary to allow the banking sector to capitalise the debt of the rice sector and provide lower interest rates as well as a longer repayment period.

The new position being pursued follows the meeting on Thursday with President Bharrat Jagdeo and the rice committee headed by Beni Sankar.

What is under consideration is a similar mechanism as is available to the housing sector, to have income from loans to the rice sector exempted from taxes so as to allow the industry a breather in repaying its debt as it seeks to recover.

According to sources, the general understanding of the committee and the presidential team at the Thursday meeting was that a bail out could not be sanctioned by the government and instead, the committee ought to work with the banking sector on an alternative proposal which the government could favourably look at.

The proposal outlined to President Jagdeo on Thursday was for a $9 billion bail out by the issue of a 10-year government guaranteed bond to raise money to buy that amount of the rice sector's debt from the banking industry, then charge interest of 5.5 per cent to the rice industry.

The banking sector would have considered writing off $5 billion in interest and the remaining $3 billion in principal but allowing the government to collect on this amount, so, in effect, the purchase arrangement would have seen a $12 billion debt exchanged for $9 billion.

However, before the meeting the committee, the President had told reporters that he would not support a bank bail out for bad lending. He said he was sympathetic to the small players.

It is not clear whether the President restated this position to the rice committee at the Thursday's meeting but it was at the government team's suggestion that an alternative be pursued that the rice committee has gone back to the drawing board.

One committee member had told Stabroek News after the meeting on Thursday that the committee had to do some more homework and that the discussions with the president were ongoing.

Stabroek News was made to understand that the implications of the new proposal were now being considered and the committee was yet to approach the Guyana Association of Bankers on the new proposal. The committee is expected to be in a position to pursue this new proposal with the association some time this week.

In the meantime, reports indicate that committee members are trying to pull together the relevant data to do the analysis required for a proposal to be taken to the banking sector. Depending on the outcome of the discussions between the committee and the banking sector, a government decision was expected to be made on the fiscal incentive regime which would be put in place to facilitate a rescue operation for rice.

The President has expressed a willingness to assist small players, noting that they held less than one per cent of the debt owing to the commercial banks, while the top ten borrowers owed the largest chunk of the money.

However, it has been pointed out that while a plan was afoot to save the industry financially, this would not be viable unless work was done simultaneously at the political, production and marketing levels to ensure the industry's viability.