Diesel Subsidy May Stay Until July, Thailand's Korn Says

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Diesel subsidy may stay until July, Korn says

By The Nation

Diesel subsidies may continue until July, according to Finance Minister Korn Chatikavanij, as oil prices pose a major challenge to the government's efforts to quell inflation and build support ahead of this year's general election.

"We can continue as long as there is money in the Oil Fund, and that will last in cash terms until around July," Korn said in an interview with Bloomberg Television yesterday.

Earlier, the government said the subsidies would end in April. It claimed that if diesel cost more than Bt30 per litre at the pump, it could trigger an increase in the costs of goods and services and lead to an inflation spiral.

While saying that the subsidies could run until July, Korn said the government did not intend to let the Oil Fund go into debt and hoped to phase in increases in diesel prices. During the Thaksin Shinawatra administration, the Oil Fund racked up about Bt90 billion in debt due to subsidies.

The Oil Fund has spent more than Bt14 billion in subsidies since December 17.

Prime Minister Abhisit Vejjajiva said yesterday that if reelected to lead the government, his top priority would be to help Thais cope with higher oil and food prices.

At present, the subsidy is Bt5.10 per litre. The Energy Policy Administration Committee is prepared to convene this week if oil prices keep surging on the violence in Libya and the Middle East and pressure retailers' marketing margin below Bt1 per litre.

Meanwhile, Energy Minister Wannarat Charnnukul said the ministry was ready to raise the compulsory biodiesel content from 2 per cent to 3 per cent in April, if the supply of palm oil is sufficient for both food and energy consumption. If the compulsory level is raised to 3 per cent, this will raise demand for crude palm oil by 40,000 tonnes per day.

He said this should not be a problem given that the inventory of crude palm oil has risen to the normal level of 120,000 tonnes.

PTT president Prasert Bunsumpun said the biodiesel plants of Bangchak Petroleum and PTT Chemical were ready to produce more biodiesel to absorb the extra supply.

Anusorn Sangnimnuan, president of Bangchak, said the company's biodiesel plant was now running at half of its capacity of 300,000 barrels per day. He noted that retailers would need two weeks to comply with the new requirement.

-- The Nation 2011-03-29