Energy subsidies approved

The move is aimed at helping ease people's cost-of-living burden and fuel economic activity during this critical juncture, it said.

Energy Minister Wannarat Charnnukul said the price of diesel oil would be cut by Bt2 a litre, while the subsidies for cooking gas (liquefied petroleum gas, or LPG) and natural gas for vehicles (NGV; also called compressed natural gas, or CNG) would remain intact for another year, until next August.

The fuel-tariff (FT) surcharge on electricity rates will be kept unchanged at 92 satang a unit even though it was supposed to go up later this year.

The pump price of diesel will fall with the government's Oil and Energy Conservation funds dropping their tariffs by Bt1.25 and 70 satang a litre, respectively. This will cost the Oil Fund Bt856 million a month.

The price of B5 biodiesel will also be reduced by 81 satang a litre, in order to promote the use of this alternative fuel, costing the government Bt421 million a month.

Second, the government will spend Bt740 million a month over the next year to subsidise LPG, which is imported at Bt25.73 a kilogram but resold domestically at only Bt18.13.

The country buys 80,000-100,000 tonnes of LPG from abroad each month.

Third, the government will spend Bt300 million a month to subsidise CNG for another year.

Subsidies will cover the losses shouldered by PTT, the importer, so that the present retail price of Bt8.50 a kilogram will remain unchanged.

Fourth, the government will spend Bt1.2 billion over four months to subsidise 30,000 taxis that want to convert to running on NGV. Altogether, the four measures will cost the government Bt27.5 billion.

Fifth, the government will use Bt10 billion to subsidise the FT surcharge on electric bills.

Wannarat said the government would ask the Electricity Generating Authority of Thailand (Egat) to delay adjustment of the FT further, for another year.

The government already owes Bt20 billion to Egat for keeping the FT below the agency's cost, and the year's extension will add Bt10 billion to the state's outstanding debt to it.

This will benefit the general public, as well as industries whose cost will rise if electricity is more expensive, Wannarat added.

Oil expert Manoon Siriwan yesterday came out in support of the government measures, saying this would help ensure a smooth economic recovery.

The government has done the right thing to cut the contributions to the funds without touching the fuel excise tax, which should be kept as the final weapon when the global oil price peaks later this year, he said.

Anusorn Sangnimnuan, president of Bangchak Petroleum, said the oil retailer was ready to adjust its prices as soon as the Cabinet approved the lower contributions.

However, he is concerned about the smaller differential between the prices of diesel B5 and B2. The gap at present is kept at Bt2.80 a litre, in order to encourage consumers to fill up their tanks with B5, which contains 5-per-cent biodiesel.

"The narrower gap may harm the government's policy of promoting alternative energy," he said.

Out of a daily diesel consumption of 50 million litres, B2 and B5 account for equal parts.