The purpose of this paper is to examine the efficiency of the direct payments program for rice industry newly introduced to move to market orientation required under the WTO regime. The welfare analysis is conducted theoretically and empirically to see how efficient the policy is in supporting rice farmers. The results show that the share of fixed payment plays a critical role in determining the efficiency although many other factors affect it. Efficiency of the rice direct payments policy improves as the fixed payment increases ceteris paribus, and its overall efficiency depends on how much the fixed payment accounts for of the total payment. In this context, current direct payments program proves to be very efficient despite its market distortion effects stemming from the variable direct payment linked to targe price. This is due mainly to high proportion of fixed payment which are market-neutral. The results also show that rice farmers' income increases while total government payment decreases as the fixed payment rises.