The Energy Ministry is speeding up a plan to purchase a new block of 200,000 tonnes of crude palm oil after the cabinet acknowledged the measure on Tuesday.
Energy Minister Siri Jirapongphan said the first batch, totalling 100,000 tonnes, should be purchased within 15 days.
The state-run Electricity Generating Authority of Thailand (Egat) has been ordered to buy 200,000 tonnes of crude palm oil. It will pay for the first volume to extract oil within seven days.
"Egat will announce other details on its website," Mr Siri said.
He said the Commerce and Interior ministries will start to check the stock of crude palm oil within two weeks.
Egat will invite owners of oil extraction plants to propose their sale prices next Wednesday.
"The first shipment is expected to start from May 20," Mr Siri said.
He said the remaining 100,000 tonnes will be bought in June and July, with the Commerce Ministry proposing a purchasing plan.
Last Thursday, the National Oil Palm Policy Committee, chaired by Deputy Prime Minister Prawit Wongsuwon, approved a proposal to purchase 200,000 tonnes of crude palm oil by Egat.
The government aims to increase the domestic prices of fresh palm nuts and crude palm oil.
The goal is to push the price up to 2.80-3.00 baht per kilogramme for fresh palm nuts and 16 baht/kg for crude palm oil in May, rising from 2.19 baht/kg for fresh palm nuts and 15.31 baht/kg for crude palm oil in April.
Egat will use 45,000-50,000 tonnes of crude palm oil per month for power generation at its Bang Pakong plant in Chachoengsao province.
Earlier, Egat completed the purchase of 160,000 tonnes of crude palm oil for power generation from 31 distributors on April 20.
Mr Siri said the committee approved on March 13 the absorption of 100,000 tonnes of crude palm oil by PTT Plc to produce and export biodiesel, in another attempt to raise prices in the domestic market.
All measures are aimed at absorbing a surplus of 400,000 tonnes of crude palm oil, compared with a normal stock of 250,000 tonnes.
There are 144 warehouses of crude palm oil nationwide.
Mr Siri said the power generation cost at the Bang Pakong plant stands at 1.2 billion baht from 200,000 tonnes of crude palm oil. This cost is higher than natural gas, he said, though the quality of power generation is similar.
"The cabinet ordered Egat to cooperate with the Finance Ministry on ways to handle this cost and make a public agreement because the higher cost of power generation will be passed on to consumers," Mr Siri said.