The Energy Fund Administration Institute (EFAI), the state agency responsible for aggregate oil-price subsidies in Thailand, is prepared to ask for a Bt5-billion emergency fund to prepare for a lower contribution from petrol sales following the scrapping of octane 95 next year.

The EFAI also plans to cut cooking-gas subsidies by half in preparation for a delay in the price flotation of cooking gas.

Sivanan na Nakorn, director of the EFAI, said it had discussed a one-year loan with financial institutions.

It could be charged at an interest rate of 1 percentage point below the minimum lending rate.

"The emergency fund will help the Oil

Fund cope with the lower contribution when octane-95 petrol is replaced by gasohol 95

from January 1," the agency's director said.

At present, oil retailers contribute Bt2.50 to the Oil Fund for every litre of octane-95 petrol that is sold, and 54 satang for each litre of gasohol 95.

"We don't expect the government to immediately increase the contribution from gasohol 95, because it will want to promote the fuel. Thus, when the sale of octane-95 petrol is scrapped, the Oil Fund's revenue will drop," Sivanan said.

So far, the Oil Fund has seen a decline in revenue because of lower fuel consumption amid persistently high fuel prices.

Diesel consumption has dropped from 52 million litres a month last year to 46 million litres this.

It is anticipated that the contribution from diesel sales will not be raised during the winter season, when diesel demand and prices across the world will increase.

The higher mandatory contribution would only push up domestic retail prices, which could in turn damage the entire economy, Sivanan said.

On the proposal to lower contributions to the Oil Fund to reduce the public burden, Sivanan said it was a national issue to be decided by policymakers.

"That would raise the Oil Fund's burden, as the lower contributions will reduce the fund's revenue, and the fund will need to negotiate with creditors to reschedule loans.

"The interest rate burden could increase," he said.

As of September, the Oil Fund earns Bt2.5 billion monthly against its financial burden of Bt2.59 billion.

The fund's aggregate debt burden is Bt56 billion. Bt26.4 billion is financed by bonds and Bt29.6 billion by bank borrowings.

The Kingdom has raked up an overall burden of Bt11 billion from subsidising cooking gas, which forced the EFAI to cut the monthly subsidy by half from Bt500 million to Bt250 million.