PM Yingluck Shinawatra is being investigated by Thailand’s official anti-corruption commission in connection with the government’s controversial rice subsidy scheme.
The policy guarantees Thai rice farmers a much higher price than on the global market, but critics say it is too expensive and vulnerable to corruption.
The commission has already charged one minister, and is investigating others.
The news comes as Yingluck Shinawatra already faces intense pressure to resign.
Anti-government protesters have been marching through the capital, saying they will shut it down until their demands are met.
They accuse her government of being under the control of her brother, ousted former leader Thaksin Shinawatra.
They say they want an unelected “People’s Council” instead, to reform the electoral system.
The rice purchase scheme was launched in 2011, with the aim of boosting farmers’ incomes and helping alleviate rural poverty.
But it has resulted in the accumulation of huge stockpiles of rice, which the government cannot sell.
The National Anti-Corruption Commission (NACC) says it is looking into Yingluck Shinawatra’s role in the scheme, and investigating her for possible negligence of duty.
“Those who oversaw the scheme knew there were losses but did not put a stop to it,” NACC spokeswoman Vicha Mahakhun told a news conference.
As prime minister, Yingluck Shinawatra is nominally the head of the National Rice Committee.
Farmers have traditionally been some of Yingluck Shinawatra’s most ardent supporters. Her Phuea Thai Party was helped to power in 2011 by offering to buy rice at above the market price.
But the rice policy is thought to be costing Thailand around $10 billion a year – and the government has been unable to pay farmers for their most recent harvest, because a bond issue last year failed to raise sufficient funds.
Farmers are already talking about marching on Bangkok in protest.
In addition, if the NACC finds PM Yingluck Shinawatra guilty, she could be banned from politics, along with other ministers.
This would cast another shadow over the election she has called for next month.
The election is already proving contentious. The main opposition Democrat Party is boycotting the polls, which it fears will once again return the Shinawatra family to power.
Anti-government protesters have also rejected the elections, demanding electoral reforms.
Yingluck Shinawatra is currently moving around Bangkok to avoid the protesters blockading her office – although police said on Thursday that the crowds on the streets were gradually dwindling in number.