The Energy Ministry's Energy Business Department has confirmed it will raise the tax on liquefied petroleum gas (LPG) for the transport sector in the second half of this year at a rate that will be fairer to users of other fuels.
The department's director-general Witoon Kulcharoenwirat said the tax on LPG was not likely to have a major impact on business or the economy as the new retail price would still be substantially lower than other fuels such as diesel or petrol. It would not add much more cost to the transport sector either, he said.
Based on the heat rate and tax on other petrols, the tax will be raised by another 2.5 baht per litre, up from 1.1 baht. This will push the LPG retail price to 16 baht per litre from 14 baht.
Retail prices of diesel and petrol range from 26-29 baht, so LPG should remain popular in the transport sector, said Mr Witoon.
Some 900,000 vehicles were registered as being LPG-compatible at the end of May, down slightly from 1.2 million units, mainly because of declining oil prices.
LPG contains an average heat rate of 25,000 British thermal units (BTU), slightly below that of petrol and diesel at 30,000 BTU, he said.
"We intend to arrange fair consumption between gas and oil on an equal basis. It is not because we want to drive this business off the road," said Mr Witoon.
He said the tax would be phased in gradually after it is implemented by the Energy Policy and Planning Office.
The ministry also plans to tax compressed natural gas (CNG) for the transport sector as well as start collecting a levy on the gas, said Mr Witoon. The retail price of CNG is capped at around two baht per kilogram below its production cost, making the retail price 12.5 baht per kg.
Last week the Thai Auto Gas Business Association (Tagba) called on the department to delay the LPG tax as it is concerned the plan would put vehicle modification companies out of business. Tagba chairman Surasak Nittiwat said 50-60 billion baht worth of business could evaporate because of the higher tax.
He said the government should switch to taxing LPG for petrochemical feedstock to earn more revenue, rather than the transport sector. LPG demand in the transport sector has dropped since the government initiated its plan to float LPG prices in February. LPG imports were halved to 93,000 tonnes in May from their monthly average last year.