UPDATE 1-Thai govt stuns market by scrapping cut in rice price
* Price cut only became effective on Monday
* Farmers had threatened to protest in Bangkok
* Export group says the government has lost credibility
(Adds market reaction, quote from exporter, minister)
BANGKOK, July 1 (Reuters) - Thailand's government on Monday reversed a cut in the rice intervention price that had been agreed less than two weeks ago, apparently giving in to farmers who had threatened protests in the capital.
Finance Minister Kittirat Na Ranong told reporters the national rice committee, made up of government officials and industry representatives, had decided to push the price back up to 15,000 baht ($480) a tonne.
That is way above the market price and has not only made Thai rice uncompetitive on world markets but also been a major drag on the government budget.
In the year to September 2012, the government says it lost $4.4 billion from the scheme, which caused rating agency Moody's to warn that a target of balancing the budget might be jeopardised and fuelled a public outcry.
The 20 percent cut in the price to 12,000 baht had only become effective on Monday, having an immediate impact by pushing the export price of 5 percent broken rice down to $480 a tonne, the lowest level since June 2011, from $520 on Friday.
Exporters were astonished at the about turn.
"We don't know where prices should be now. We may have to wait until the dust settles before offering prices again," said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association. "But what we know for sure is that this government has no credibility at all."
Finance Minister Kittirat was unconcerned.
"Everything is still going according to our plan and the framework we set out, and it should not be a problem," he told reporters.
He said the government estimated there was not much rice left with farmers from their second crop, which is marketed until late September, so it would not be a huge burden on the budget to continue to buy at 15,000 baht a tonne.
Most traders anticipated that export prices would jump back up to where they were last week before the cut came into force.
"But the market is in a state of shock right now and both buyers and sellers are holding back. They don't dare take any position," said one Bangkok-based trader. ($1 = 31.0150 Thai baht)
(Additional reporting by Apornrath Phoonphongphiphat; Editing by Alan Raybould and Michael Urquhart)