President Bharrat Jagdeo says there is a reasonably good chance of concluding an agreement before yearend on a proposal to address the repayment problems of the 1200 rice farmers who have bank loans of $10 million or less.

These rice farmers represent the bulk of the 1300 rice farmers indebted to the banking institutions and the proposal, according to President Jagdeo, would bring huge relief to them.

President Jagdeo told reporters at the Office of the President yesterday that the proposal would provide for the waiver of their accrued interest, some reduction in the principal, some lowering in the interest and an extended repayment period.

The liability of these small rice farmers, he said, represents less than 20 per cent of the $6 billion set aside by the banks as provisioning for bad loans to the rice industry.

President Jagdeo stressed that the proposal would not involve any cash injection from the Treasury but would release about $675 million of the banks' own money that they had set aside as provisioning for these loans.

"I think that it makes a lot of sense for the banks to clean up their portfolio and it will not affect the soundness of the banking system as this arrangement would only deal with $675 million of provisioning when the total provisioning in the system is over $6 billion."

Meanwhile, concern is mounting among major players in the rice industry that only small farmers with loans under $10 million will benefit from the proposed relief package being negotiated between the government and the Guyana Association of Bankers.

The larger players are pointing to the folly of this as there is no capital floating around to resuscitate the industry if the big farmers/millers go under and they note the threat such a stance will pose to the government's effort to attract new large-scale investment in the rice sector.

One large player noted that it was not the farmers who sold rice on foreign market, but the large farmers/millers who bought the paddy, produced the rice and negotiated markets for exports. This player wanted to know if only the small players were being rescued, how the rice industry would recover and who would buy the produce.

Already, a number of large-scale rice operators are producing at 25% capacity and in one case, a key player's substantial US dollar loan account has not been serviced in the last year.

President Jagdeo has been on record as saying he was not interested in helping 'fat cats'.

Another rice player, asked to respond to the insinuation that the large millers had money parked overseas in assets or earning interest, denied this. This player said that in his case, all of his foreign assets were returned and invested in his business as it did not make sense to owe huge amounts to the banks. The rice miller said that he was in the business to make money and has had to slash his establishment significantly in recent months to stay afloat.

Stabroek News understands that the package being negotiated between the government and the Guyana Association of Bankers will see the interest on the rice industry debt being written off as well as 25% of the principal. Additionally, there will be a tax waiver on the $300 million debt of the small farmers. The banks are also asking for a tax waiver on the ten per cent interest to be charged to the small players over the next ten years, the period over which the loan portfolios are to be rescheduled.

The tax credit in this case is expected to cost the government $3 billion over the next ten years. However, an earlier proposal submitted by a committee of rice players, would have seen the government giving a tax credit of $4.9 billion for the benefit of the entire rice sector.

Rice exports from Guyana at the end of November stood at 190,000 tonnes and earned US$46 million. It is now projected that exports at the end of the year will stand at 210,000 metric tonnes, down from the initial projection of 220,000 tonnes. Total earnings are expected to be US$50 million, US$5 million less than projected.

CARICOM accounted for 72,000 tonnes of the exports, Europe 94,000 tonnes, the Other Countries and Territories 20,000 tonnes and other states four thousand tonnes.

Of the exports, cargo rice accounted for 91,448 tonnes earning US$21 million, white rice constituted 49,000 tonnes earning US$14 million, white broken made up 21,000 tonnes earning US$4 million and parboiled rice amounted to 9,000 tonnes earning US$3.5 million. Exports of parboiled cargo rice totalled 7,000 tonnes.

Currently, rice prices per tonne are US$412 for parboiled rice, US$289,000 for milled white rice and US$210 per ton of cargo rice.