By Apornrath Phoonphongphiphat
BANGKOK, Feb 11 (Reuters) - Thailand's caretaker government said on Tuesday it did not have the power to renew a rice subsidy scheme when it expires at the end of the month, risking further alienating farmers angry over late payments for their current crop.
Prime Minister Yingluck Shinawatra, assailed since November by a largely urban, middle class protest movement bent on driving her from office, is now facing unrest among her Puea Thai Party's natural supporters in the countryside, where many farmers have gone unpaid for their rice for months.
Yingluck has led a caretaker administration since December, when she dissolved parliament and called a snap election in an attempt to end the anti-government street protests. As a result, the government's spending and borrowing powers are heavily curtailed.
"We are just a caretaker government, which has no power to extend any policy. The rice-buying scheme will end automatically on February 28," Varathep Rattanakorn, a minister in the prime minister's office, told Reuters.
The rice programme was one of the populist policies associated with Yingluck's brother, Thaksin Shinawatra, a former prime minister central to a stubborn conflict that has divided Thais since he was toppled by the military in 2006.
The pledge to pay farmers a price way above world rice benchmarks helped sweep Yingluck to power in 2011, but the scheme has become mired in allegations of corruption and growing losses that are making it increasingly hard to fund.
In recent weeks, big banks have refused to extend bridging loans to help fund the programme, unconvinced the government has the authority to seek them, while China has cancelled a government-to-government rice deal due to a corruption probe.
More than 1,000 farmers protested outside the government's temporary base in northern Bangkok on Monday and said they would continue their campaign after a meeting between their representatives and ministers broke up without agreement.
Finance Minister Kittirat Na Ranong said on Tuesday the farmers would ultimately get paid and appealed for more time to arrange bank financing.
"The government believes it could complete the rice loan in a few days' time," he told reporters ahead of a cabinet meeting. "We need to reassure financial institutions that the rice loan will not breach the law."
After the meeting, Commerce Minister Niwatthamrong Bunsongphaisan said the cabinet had approved taking 712 million baht ($22 million) from the state budget to pay some farmers but that needed Election Commission approval first.
"We expect the Election Commission will approve it very soon because it's a problem for farmers," he told reporters
The farmers have kept their protests separate from the anti-government demonstrations that have been blocking parts of Bangkok for the past three months.
Those protesters, mainly drawn from Bangkok and the south, say former telecoms tycoon Thaksin has subverted a fragile democracy with populist policies such as subsidies, cheap loans and healthcare to woo poorer voters in the rural but populous north and northeast and guarantee victory for his parties in every election since 2001.
A Feb. 2 election that the government hoped would end the crisis was disrupted in several parts of the country, and a new administration cannot be installed until voting is completed. ($1 = 32.8150 baht) (Writing by Alex Richardson; Editing by Alan Raybould and Robert Birsel)