* Govt declines to give prices, details for Chinese deal
* China still in talks with Thailand on deal - source (Recasts with comment on stocks, sale to China)
By Apornrath Phoonphongphiphat
BANGKOK, Sept 12 (Reuters) - Thailand's government said on Thursday it had sold 1.2 million tonnes of rice from its stockpiles to China and that its stocks now stood at 10 million tonnes, a huge drop from the previously reported 17 million and one that traders found hard to explain.
Industry officials were unsure why China would buy so much rice at a time when demand was weak and there were abundant cheaper supplies elsewhere, while a Chinese source said the two sides were still in talks.
"We have signed a contract to sell and it would take about a year to deliver the whole lot," Commerce Minister Niwatthamrong Bunsongphaisan told reporters. He declined to give prices or other details.
The government has built up huge stockpiles because of a controversial intervention scheme in operation since October 2011 in which it has bought rice from farmers at prices way above the market level, which has made exports uncompetitive.
Opponents of the scheme say it is riddled with corruption and has led to smuggling of rice from neighbouring countries to take advantage of the high prices on offer. Moody's rating agency has warned about the damage to the state budget.
Niwatthamrong said stockpiles had dropped to 10 million tonnes after the government sold a substantial amount of grain since last year. Again, he gave no details.
His predecessor said in September last year that the government had signed deals to sell 7.3 million tonnes to foreign governments, but exporters were always sceptical about the claim and in the months that followed they saw no evidence of large shipments to back it up.
As late as June this year, when the government was forced to be a little more open about its intervention programme after a public outcry over the cost, Deputy Commerce Minister Nattawut Saikuar told a briefing stockpiles stood at 17 million tonnes.
"It's all political rhetoric. Nothing much has moved on the physical front. They are talking to several countries and signing MOUs but there's not been much action on the physical side," said a Singapore-based trader who asked not to be named.
"They have been talking about selling 250,000 tonnes to Iran but no one is clear about the payment terms and we very much doubt that business will take place. The government has sold some 500,000 tonnes to Iraq. That is legitimate business," he added.
Thailand normally exports 8 to 10 million tonnes of rice each year but the high prices caused by the intervention scheme caused shipments to fall to 6.9 million tonnes in 2012, when Thailand lost its crown as top exporter to India.
Thailand's 5 percent broken white rice was quoted at $420 per tonne on Thursday, well above the same grade from India and Vietnam at $405 and $360 a tonne respectively.
An industry source close to the State Grain Administration, China's state body responsible for grain trading and distribution, said talks on a government-to-government deal had been taking place with Thailand for some time but nothing had been settled.
"It is impossible for China to import that much rice as China doesn't need that much," the source said, referring to the 1.2 million tonnes.
Under the intervention scheme, the government buys unmilled rice from farmers at 15,000 baht per tonne. The cost of milled rice kept in state stockpiles is estimated at around 22,000 baht per tonne, plus milling and storing costs.
The government has said it spent more than 600 billion baht in buying rice from farmers since October 2011. It has estimated its initial losses at 136 billion baht from the October 2011 to September 2012 crop and losses are bound to rise after it decided this month to extend the scheme for another year. ($1 = 31.9800 Thai baht) (Additional reporting by Naveen Thukral in SINGAPORE and Niu Shuping in BEIJING; Editing by Alan Raybould and Michael Urquhart)
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