By Simon Webb and Pairat Temphairojana

UDON THANI, Thailand (Reuters) - From self-imposed exile, the influential leader of Thailand's rural "red shirt" opposition movement has delivered a simple message to followers chafing at the military junta's iron rule: lay low for now, don't panic, "play dead".

Billionaire former Prime Minister Thaksin Shinawatra, long-time political leader of the north's disenfranchised electorate, is watching events at home closely and urging patience from those who want to see his allies return to power.

"When I spoke to Thaksin, he told me to pretend to be dead a little longer," red shirt leader Kwanchai Praipana, a popular pro-Thaksin leader in the northeastern province of Udon Thani, told Reuters.

"He told me to ... wait until the next election. That will be the moment that we will win. The only question is whether an election will ever take place."

Kwanchai said he spoke to Thaksin a month ago, though he did not specify how they communicated. Thaksin, who lives abroad to avoid a jail sentence for graft, was ousted in a coup in 2006, but remains a major figure in Thai politics.

While the military has kept a firm grip on power since it felled the remnants of the government of Thaksin's sister Yingluck in another coup last year, he and his allies have won every election since 2001 and anger is mounting among farmers and political opponents.

The military government has slashed rural subsidies and coup leader and Prime Minister Prayuth Chan-ocha said this month the next election would not be held until "around" July, 2017, the latest delay to Thailand's return to democracy.

DRIVE-BY SHOOTING

The reference to playing dead resonated with Kwanchai, who rolled up his sleeve to show a scar the length of his upper arm from a drive-by shooting at his rural home when Bangkok was paralyzed by protests that preceded the coup.

Prayuth's ban on political activity has severely curtailed the red shirt movement and his junta has quashed any sign of open dissent.

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"They have bullied us too much," said Kwanchai, adding that he has to report his movements to the military every day.

Prayuth staged the coup and banned political activity after months of sometimes deadly street clashes, saying he had to reconcile a dangerously divided society. Many Thais, especially Bangkok's middle class and urban elite, backed the intervention.

But sharp divisions remain and the Shinawatras retain their popularity in northern strongholds.

A draft constitution that critics said was an attempt by Prayuth to prevent a comeback by the Shinawatras was rejected by a military-appointed reform council rather than taken to a national referendum that may have become a public test of the junta's popularity.

"At first we thought the drafting of the constitution, had it been passed, would have been the time to protest," said Sabina Shah, a red shirt leader and radio DJ in the northeastern city of Khon Kaen. The radio station was shut down after the coup and remains off air.

"People want to protest. But they are afraid, despite facing difficulties and hardship...The economy's been going backwards."

Hundreds of activists on Saturday defied a ban on protests and marched in Bangkok in a rare rally against the military to mark the ninth anniversary of the coup against Thaksin.

Lines of police stood by as crowds of people chanting "no dictatorship" and carrying anti-junta banners marched to the city's Democracy Monument.

"ALMOST DYING"

Compared with the Shinawatra clan, Prayuth has done little for Thailand's farmers.

He ended subsidy schemes that funneled billions of dollars to agricultural communities.

The populist schemes were fiercely criticized as vote buying by opponents of the Shinawatras.

Without the subsidies, rice farmers have seen their income per kilogram of rice fall by about a third and are struggling to pay down debt they took on when times were good.

"I'm not that happy at the moment because agricultural prices for us have not been good at all," said farmer Samrong Pongthai in lush rice fields outside Udon Thani.

"The government won't increase the price. It's been a struggle really. You make a loss if you sell it these days."

Despite his distaste for populism, Prayuth has turned to one of the architects of Thaksin's economic policies in an attempt to revive Thailand's stumbling economy.

But farmers say the soft loans and spending on small projects announced so far are not enough.

"This government tells us to stop making demands, and to live sustainably," said Samai Sribang, who owns a rubber plantation in Nong Khai province near the border with Laos.

"But how can it be sustainable if we can't sell our goods? If Thaksin can hear us, tell him we are almost dying."

Prayuth's government is considering asking farmers to not plant an off-season crop next year after drought left many reservoirs low. It has also tried to encourage rubber farmers to cut down trees to reduce oversupply.

Both measures will only add to farmers' resentment, said Teerasak Teecayuphan, the mayor of Khon Kaen.

"If that is all the government can come up with there is little hope of restoring political faith," Teerasak said.

"Sooner or later this pot will boil over. You can't suppress it for long if you don't solve the problems."

(Editing by Mike Collett-White)