(Adds comment from prime minister, paragraphs 1, 14-16)
By Amy Sawitta Lefevre and Pracha Hariraksapitak
BANGKOK, Feb 5 (Reuters) - Thailand's fiery protest leader denounced the government's battered rice-buying scheme as corrupt and the prime minister leapt to its defence on Wednesday, days after an election did nothing to restore stability in the divided country.
Suthep Thaugsuban and his supporters have been trying to topple Prime Minister Yingluck Shinawatra since November, prompting the government to announce a state of emergency ahead of Sunday's vote, which was boycotted by the opposition.
The rice programme was among the populist policies pioneered by Yingluck's brother, Thaksin Shinawatra, a former prime minister central to the conflict that has divided Thais for eight years. He was toppled by the military in 2006.
Generous subsidies for farmers were a centrepiece of the platform that swept Yingluck to power in a landslide election win in 2011, but have left Thailand with vast stockpiles of rice and a bill it is struggling to fund.
Losses to the taxpayer, estimated at 200 billion baht ($6 billion) a year, have fuelled protests against Yingluck and payment problems risk alienating farmers at the heart of her support base in the poorer north and northeast.
"Yingluck took farmers' rice more than seven months ago and hasn't paid them," Suthep told supporters on Wednesday, even as another warrant was issued for his arrest.
"Some of them have killed themselves and some of them are crying in front of the television because they don't have a penny ... The government said the rice-purchasing policy was to help farmers but instead the policy became part of the government's corruption machine."
Yingluck and her government are being investigated by an anti-graft panel for alleged irregularities in the rice scheme. That and other cases going through the politicised courts could dissolve her Puea Thai Party and ban top officials.
The rice programme is close to collapse after the commerce minister said China had cancelled an order for 1.2 million tonnes due to the corruption investigation.
State-run Krung Thai Bank has joined other lenders in saying it will not provide loans urgently needed to rescue a scheme that has at times been buying rice at prices up to two-thirds above the prevailing benchmark rates.
"MONEY WENT TO THE DOGS"
Anti-government protests have been blocking parts of Bangkok in the latest round of an eight-year dispute that broadly pits Bangkok's middle class, southern Thais and the royalist establishment against the mostly poor, rural supporters of Yingluck and Thaksin.
Ten people have been killed in sporadic bursts of violence, although the capital has been calm since Sunday's disrupted poll.
"Farmers who took their rice to milling houses received just over 10,000 baht ($310) when the price they were guaranteed was 15,000 baht," Suthep said at a rally at one of the protest sites in Bangkok's central business district.
"The rest of the money went to into the mouths of the dogs ... Each of these dogs is fat."
Yingluck said the government was only trying to help farmers.
"These problems stem from the dissolution of parliament (last year) which made it difficult under the framework of the law to approve payments," she told reporters.
"Whether this scheme is extended or not is up to the next government ... Everyone knows that the government does not have the power to do anything that will affect the incoming government so this issue may take time to resolve."
The Criminal Court approved arrest warrants on Wednesday for 19 protest leaders, including Suthep, for violating the state of emergency.
The decree bans political gatherings of more than five people, despite the fact that thousands have gathered at main intersections every night since it was introduced last month.
Labour Minister Chalerm Yoobamrung, who is in charge of the state of emergency, has threatened to arrest protest leaders several times but has yet to act.
Suthep faces charges of murder related to violence in 2010 when, as deputy prime minister, he sent in troops to crush protests by "red shirt" supporters of Thaksin. More than 90 people were killed.
Suthep is due to appear in court on Thursday in that case.
The demonstrators say Yingluck is Thaksin's puppet and the costly giveaways that won his parties every election since 2001 are tantamount to vote-buying using taxpayers' money.
They say Thaksin's new political order is tainted by graft and cronyism and want an appointed "people's council" to replace Yingluck and overhaul a political system hijacked by her brother, who lives in exile to avoid a jail term for graft.
Protesters succeeded in disrupting voting in a fifth of constituencies in Sunday's election. The incomplete poll, the results of which have not been announced, means Yingluck could head a caretaker administration for months, unable to make policy decisions, until vacant seats can be filled. (Writing by Nick Macfie; Editing by Robert Birsel)
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