Cap on diesel, LPG should be short-term: group

Economy June 03, 2014 00:00

By Kwanchai Rungfapaisarn
The Na

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NCPO urged on overall reform of energy price structure to benefit all parties

The decision of the National Council for Peace and Order to cap the price of diesel fuel and liquefied petroleum gas (LPG) price should be short term, a Thai group proposing energy reform towards sustainability urged yesterday.
The NCPO, however, should have a concrete plan for both the short and long term to reform the overall energy price structure so that local stakeholders, including manufacturers, consumers and traders, will all be benefited.The NCPO, on Sunday, agreed to cap the diesel fuel and LPG price in a bid to help relieve people’s burdens until the oil price structure is reformed. 
Under the plan, the price of diesel will be maintained for 30 days and the price of LPG will be frozen at Saturday’s price of Bt22.60 per kilogram until there were further discussions on the reform of the oil and gas price structure.“We would like the NCPO to have a concrete plan to reshuffle the overall energy price structure and to have a system that is transparent and fair to all stakeholders,” said Piyasvasti Amranand, veteran energy expert and one of the founding members of the group proposing energy reform in Thailand.
He said energy reform should depend on time, opportunity, and the surrounding environment.During the period of General Prem Tinsulanonda, who was prime minister from 1980-1988, they took two to three years to reform the energy structure in Thailand. This time, it is a good sign that the NCPO has a clear direction and has already started to reform the local energy sector.Piyasvasti said that many other countries, such as Malaysia and Indonesia, have also the same distortion in energy price structure. 
However, those countries had strong energy resources domestically. It was different for Thailand, which is highly dependent on import of energy.He said that currently, the local users of benzil fuel paid a higher price than it should be. The indirect measure exercised by the previous government to subsidise the diesel price through excise tax exemption had also led to loss of revenue by about Bt100 billion a year.
Piyasvasti said that half of LPG had been sourced locally from gas separation plants, and their price had not been adjusted according to the world market.
“The LPG price sourced locally from the gas separation plants, which is now at US$333 per tonne, has been set since 2007 and has not been changed since. However, on the world market, the price of raw materials used in producing LPG had increased by 40 per cent so far [from 2007],” he said.
Piyasvasti added that it would have detailed discussions for setting an appropriate LPG price, which is fair to all stakeholders.For diesel price, the excise tax exemption is also not fair to all street drivers, according to Piyasvasti, adding that possible revenue being allocated to subsidise the diesel price in terms of excise tax exemption, which is at about Bt100 billion annually, should be rather used to develop the country’s public and mass transportation, such as rail system."In my view, the excise tax collected from benzil and gasohol fuel should be reduced at a certain level under the price reform,” he said.
Piyasvasti said that as a long-term reform measure, persons involved in the country’s policy-making process should be prohibited to work at any state-enterprise or state-owned company so as to avoid conflict of interest. Any rule or regulation should be transparent and rely on world standard.
Former Bangchak Petroleum executive Manoon Siriwan, who is also another founding member of the group proposing energy reform in Thailand towards sustainability, said there would be no any problem if the NCPO caps the diesel and LPG price in the short term, but not more than one or two months.“Under our proposal, the oil fund should exist with the main objective, to support the stability of energy price. 
We, however, disagree with any subsidising activities, such as on LPG, which would distort the price of energy,” he said.Manoon said the group had also proposed the country’s energy reform, which should be implemented in both the short and long-term.The first is that the overall structure of energy price should be totally reformed. In the short term, the NCPO should consider the price reform on fuel, such as diesel, benzil, and natural gas, like NGV and LPG, and natural gas being supplied to petrochemical plants."The current oil fund becomes a burden on the users of benzil and gasohol fuel.
 About Bt10 per litre of benzil 95 has been collected to the oil fund. Including VAT and excise tax, the total charge will be at Bt21 per litre, which accounts for more than 40 per cent of the total retail price of benzil 95 fuel," said Manoon, adding that this will cause the benzil price to be higher than normal while the users of benzil fuel are not all high-income earners. Many of 17 million motorcycle drivers in the Kingdom are low-income earners.Manoon said that the NCPO should reduce monopoly and raise business competition in the country’s energy sector. PTT, for example, had currently a strong monopoly in its natural gas pipeline business. Such business should be totally separated from PTT to promote free competition or so-called “third party access” in the sector. 
Some other products such as LNG should be freely imported into the country in the future.He said that the opening of the 21st petroleum concession in the Gulf of Thailand should be renewed after being postponed for seven years. The move would allow local manufacturers to explore new natural sources for petroleum products. A new working committee should be set up to be in charge of management and benefit-sharing of the concession process.