Thai Govt To Use Oil Fund For Subsidising Diesel

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ENERGY

Oil Fund to be used for subsidising diesel

By WICHIT CHAITRONG,

WATCHARAPONG THONGRUNG

THE NATION

The government will use Bt5 billion from the Bt27-billion Oil Fund to subsidise retail diesel prices over the next three months to prevent a spike in the cost of living and curb inflation.

Energy Minister Wannarat Charnnukul said Prime Minister Abhisit Vejjajiva had insisted the government should cap diesel price at around Bt30 per litre.

At present, the retail prices of B3 diesel and B5 diesel are Bt29.99 and Bt29.39 per litre, respectively.

At this stage, the Finance Ministry is not ready to reduce the excise tax rate on diesel which is about Bt5 per litre, so the Energy Ministry has had to use part of the Oil Fund as subsidies.

"If the price of crude oil on the world market remains in the range of $80-$90 per barrel, we'll be able to cap the diesel price at Bt30 for about three months," Wannarat said.

"The Oil Fund will have a monthly burden of Bt538 million. Overall, there will be an outflow of at least Bt1.2 billion per month [based on the current crude oil range]."

"Once we have used up the Bt5 billion, we will consider other measures, including an excise tax cut," Wannarat added.

Finance Minister Korn Chatikavanij said yesterday the government's plan to cap the retail price of diesel at below Bt30 per litre should be a short-term measure.

Korn insisted that lowering the excise tax on diesel would do more harm than good at this stage so it is better for the Oil Fund to subsidise the diesel price.

The minister suggested that if crude-oil price continued to rise, the government should let market forces determine the price.

It is not possible for Thailand to pay subsidies for a long period because it's a net oil importer.

Pongpanu Sawetrun, director-general of the Excise Department, said it was not yet necessary to cut the tax rate to subsidise diesel prices because higher oil prices were seasonal as winter demand is rising.

"After this seasonal factor, we'll reconsider if it's necessary to use the tax measure," he said.

Meanwhile, the Energy Ministry will also propose to the next meeting of the National Energy Policy Committee that the fuel tariff on electricity charges be pegged at 92.55 satang per unit for another four months from January to April next year.

The Electricity Generating Authority of Thailand will have an extra burden to cap the fuel tariff amid rising energy prices, up from Bt2 billion to Bt3 billion estimated at the end of this year.

Egat governor Sutas Patamasiriwat said the agency would also continue to support the government's policy on free electricity for households using less than 90 units per month for another six months.

LPG RETAIL PRICE CAP

Such a measure is aimed at helping to reduce the cost of living amid rising energy prices.

Earlier, the government had planned to end free electricity in January 2011.

The Finance Ministry is responsible for reimbursing Egat for free electricity.

Since 2009, Egat has shouldered a liability of Bt23.07 billion to keep fuel tariffs unchanged.

Meanwhile, a working group chaired by Korbsak Sabhavasu, the PM's secretary-general, also plans to cap the retail price of LPG for households and transportation.

However, industries using LPG will pay more based on the world market price.

Sirisak Wittaya-udom of the Energy Ministry said there will be a ministerial regulation to require industrial users exceeding 500kg per month of LPG to have large storage tanks to differentiate them from households and small users for transportation.

Commerce Minister Porntiva Nakasai said producers of necessity goods had agreed not to increase prices over the next three months even though the minimum wage would rise Bt8-17 per day.

According to the Internal Trade Department, the prices of major raw materials and commodities are on the rise, especially that of palm oil, soybean, fertiliser, steel and copper.

-- The Nation 2010-12-16

[Ricardo]

A cynic might almost suspect that a snap-election is due !

[dominique355]

Subsidizing diesel (or gasoline for that matter) is totally counterproductive. If will create more traffic, more pollution and hinders investment in new, clean and environmentally friendly technologies. Pair that with a totally flawed import tax and excise tax system and you get what Thailand has today: an outdated park of polluting and unsafe cars.

[mccw]

Money be better spent Providing low interest finance for people to uprgade to more efficient vehicles, made in Thailand. There by boosting the economy, creating jobs, lessening pollution and gov getting money back instead of just throwing it away. Do good things to change the mind of all the redshirt songteaw drivers; buying them a new truck just before an ellection. Everyones a winner.