The Energy Policy Administration Committee (Epac) announced on Wednesday the extension of the five-baht discount on retail biodiesel B20 for an additional two months, from Aug 1.
Standard biodiesel is B7, priced at 26.39 baht per litre, so B20 costs 21.39 baht per litre in Bangkok and vicinity.
The government subsidises B20 by five baht per litre to encourage greater use by pickups, buses and trucks.
Energy Minister Sontirat Sontijirawong said the new extension period for B20 ends on Sept 30.
Wider use of B20 is meant to tackle the huge surplus of crude palm oil, now at 300,000 tonnes. Methyl ester extracted from crude palm oil is blended with diesel to make biodiesel.
With the widening spread of the retail price between B7 and B20, B20 consumption rose to 5.067 million litres per day as of July 30, from just 30,000 litres a year ago.
Epac expects B20 consumption to reach 6 million litres per day, or 10% of total diesel demand in September.
The State Oil Fund has subsidised the B20 price gap, totalling 1.686 billion baht, over the last 12 months.
A further 1 billion baht is to be used for the subsidy during August-September, Mr Sontirat said.
The ministry plans to change standard diesel from B7 to B10 in November.
Mr Sontirat said the government needs to solve the surplus of crude palm oil soon, through sustainable measures.
For the energy sector, crude palm oil should be absorbed by the production of biofuels. The ministry will soon terminate use of crude palm oil for power generation because of the high operating cost.
Due to the government's measures, the price of fresh palm nuts has risen to 2.70 baht per kilogramme from less than two baht/kg several months ago.