KUALA LUMPUR (Oct 11): The government must find an alternative to ensure the stability of the national rice industry, in order to avoid overreliance on the concession agreement with Padiberas Nasional Bhd (Bernas), said the Public Accounts Committee (PAC).

Reduced reliance towards the concession mechanism would also push the industry towards an open market, the PAC said in its report on the reception of social obligation payment as part of the national rice industry management agreement under the Ministry of Agriculture and Food Security (KPKM).

This is despite the PAC having said the concession agreement is good and has provided benefits to paddy farmers, in line with the social obligations to be met by Bernas under the third concession agreement in 2021-2031.

PAC conducted the proceedings in order to determine whether the reception of funds, assets and paddy price subsidy schemes were conducted in accordance to the law and existing agreements.

The PAC said it held proceedings on June 14 which called in three witnesses, namely Bernas division chief Abdul Rahman Mohd Nasri, rice control chief director Datuk Azman Mahmood and KPKM chief secretary Datuk Lokman Hakim Ali.

Lokman, in the proceedings said that in the ministry’s view, the role of stabilising rice prices is “a role for the government and not placed on the consideration of companies or concession holders”.

“That is why in the latest concession agreement, we make improvements by looking at the real objective where the government should fully play the role of stabilising rice prices in the market, as it not only involves this ministry but [also] other ministries as well,” he said.

Lokman was referring to the removal of one social obligation in the latest Bernas concession agreement, namely to stabilise market prices of rice.

The Bernas concession agreement was first signed for a 15-year period starting from Jan 12, 1996 to Jan 11, 2011, with a value cost of RM1.2 billion. It was extended for 10 years to Jan 10, 2021, with a value of RM2.86 billion, and then again to Jan 10, 2031 with a value of RM3.216 billion.

The costs, the report said, are for executing Bernas’ social obligations, as well as operating and capital expenditures to undertake the concession agreement.  

The company has 10 social obligations, including acting as the buyer of last resort for local rice supply, providing funds for paddy mechanisation and equipment supply, allocations for soil nutrient development (fertilisation), and large scale paddy development.  

Bernas is also responsible for managing paddy subsidy scheme payments, and serves as the sole importer of rice in Malaysia.

In the report, the PAC pointed to several weaknesses in the provision of social obligation funds by Bernas.

As at June 14, Bernas has yet to allocate RM25 million out of the RM37 million of funds provided in 2021 for social obligations.

“KPKM must ensure Bernas channels the obligation funds right on time, in line with [the] Bernas concession agreement,” the PAC said.

“KPKM, Bernas and the National Registration Department must immediately integrate and update paddy farmers to ensure payment of the paddy price subsidy scheme can be conducted transparently, efficiently and orderly,” it said.

The PAC noted that the subsidy scheme payment, managed by Bernas, was not monitored by KPKM, resulting in RM0.73 million in payments made to 300 paddy farmers who in fact had passed on. This was out of the RM634.84 million paid to farmers in 2021, the report showed.

The report also noted that KPKM’s performance report in 2021, contradicted the actual performance of Bernas’ machinery supply. This is because out of RM4.06 million provided by Bernas for machinery and equipment in the key performance indicator review, RM3.12 million was provided only in January to May 2022.

Bernas, the report said, has improved the standards of procedures for the subsidy payments for farmers that had passed away, which came in force in February. A trust was also established in May this year, for the purpose of receiving the social obligation funds provided by Bernas.

“In all, the concession agreement is good and has provided benefits to the target groups, especially farmers, in line with the policy of protecting the nation’s strategic industry in providing the country’s rice supply.

“However, there were weaknesses in the transfer of monetary funds, assets and subsidy payments,” the report said.