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Companies urged to pass on fuel savings
PHUSADEE ARUNMAS & BUSRIN TREERAPONGPICHIT
Construction materials producers and consumer product manufacturers should pass on cost savings from lower fuel charges under a government anti-inflation programme to the public, according to the Commerce Ministry.
Excise taxes for gasohol and diesel fuel will be cut by 2.45 to 3.88 baht per litre starting this Friday under the programme. Other measures, including free bus fares for Bangkok residents, free train rides upcountry, and free water and electricity for small households, will take effect in August. The 47-billion-baht programme will last until January 2009.
Siripol Yodmuangcharoen, the commerce permanent secretary, said up to 1,000 items, including cement and other construction materials, should see price reductions thanks to lower logistics expenses.
The ministry's Internal Trade Department has been ordered to "closely monitor" the price structures of products expected to benefit from the excise tax cut, both in Bangkok and in upcountry provinces. The department expects to take two weeks to complete a preliminary survey of product prices and production costs following the fuel tax cuts.
Mr Siripol said the ministry could take legal action against manufacturers who refuse to cut product prices to reflect their actual costs after the excise tax cut on fuel was implemented.
He said the ministry would also review on a case-by-case basis petitions by manufacturers to raise product prices that are already in the pipeline.
But corporate executives say it is unfair to expect the relatively minor cuts in pump prices to immediately translate into price cuts for other products and services.
One executive from a leading local cement company noted that for cement, logistics expenses were excluded from ex-factory prices, which have hovered between 1,900 baht and 2,000 baht per tonne for the past five years.
"It's not the producers responsibility frankly. We sell cement to dealers at ex-factory prices which exclude transportation costs," the executive said.
He noted that the excise tax cut in fuel did not cover falling profit margins that many producers had absorbed over the past several months due to rising production and operation costs. Retail prices have also been held down due to heavy market competition and a sluggish economic environment.
In any case, Mr Siripol said the six-point anti-inflation programme would help reduce household expenses and transportation costs for the public.
The electricity bill waivers are estimated to cover 6.47 million households nationwide, with another 9.86 million households to benefit from a 50% discount for electricity use of 81 to 150 units per month.
But Mr Siripol declined to comment on whether the assistance package would definitely help bring down inflation this year, as other factors, including global oil prices, foreign exchange rates and employment also needed to be considered.
Inflation rose to a new 10-year high of 8.9% in June, led by higher oil and food prices.
The ministry expected the inflation rate to stand at a range of 7-8% if crude oil prices average US$125 per barrel. Higher rates were anticipated if the oil prices rose over $125.
Mr Siripol added given the increasing popularity of NGV (natural gas for vehicles) and LPG (liquefied petroleum gas), the Internal Trade Department was ordered to add the two products into the basket of 373 existing products which is used to determine the consumer price index (CPI) which gauges inflation. The calculation would start next month.
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