"The EU has failed to tackle the problem of the rice stocks," said Mario Francese, managing director of Euricom SpA, Italy's biggest rice company, which has an annual turnover of $500 million. He estimated EU rice stocks at around 500,000 tonnes and said they were set to grow by a further 200,000 tonnes this year.

Privately owned Euricom is based in the northern city of Vercelli in the heart of Italy's rice growing region. Italy, the EU's biggest producer by far, grows in an average year some 1.4 million tonnes of paddy rice, mainly the japonica variety.

EU growers are struggling to sell on the world market against tough price competition from countries such as the United States, Thailand, India and Pakistan.

The European Commission is drawing up plans to reform the EU rice regime, with an emphasis on abolishing intervention and replacing it with higher aid paid directly to farmers, EU officials have said.

Reforms are meant to tackle the culture of growing for intervention and make farmers more competitive and responsive to market forces.Some northern EU states argue that by abolishing the system of intervention, the EU would not be bound by tariff ceilings at all and so could impose a much higher tariff on imports.

Intervention, buying in food commodities at guaranteed prices, is the underlying support mechanism of EU farm policy. The rice intervention period runs from April to July."Intervention helps farmers, but provides no support to the Italian milling industry," said Roberto Carriere, director of the Pavia-based Italian Rice Millers' Association (AIRI).

"The EU is spending two million euros a month to store rice, some of which is rotting," he added.The EU had failed to use up rice stocks as much-needed food aid in developing countries, he added.

Carriere said northern EU importers were resisting the abolition of intervention because they feared the higher duties they would have to pay to import increasingly popular indica varieties from outside the 15-member bloc.Francese said an end to intervention would probably lead to increasing consolidation among Italian rice growers, with bigger producers swallowing up smaller ones.

"Six thousand rice farmers in Italy is too many," he said.

He said the average area of an Italian rice farm was just 35 hectares, making it uncompetitive on the world market.

Italy exported 664,339 tonnes of rice in 1999, up from 598,391 in 1998, according to the National Cereals Association (ANACER).

Italy's production is used domestically for the traditional dish risotto, consumed mainly in the north of the country, as well as for the animal feed industry. After Italy, Spain is the EU's second biggest producer, turning out 600,000-700,000 tonnes of paddy rice in an average year and growing mainly japonica for use in paella. Other leading EU rice producers include Portugal, France and Greece.