State mulls reducing diesel excise tax

State mulls reducing diesel excise tax

Fluctuations in diesel prices can affect goods prices, worsening inflation.
Fluctuations in diesel prices can affect goods prices, worsening inflation.

The government's struggle in dealing with the higher cost of living may cause authorities to consider reducing the excise tax on diesel to keep its price below 30 baht a litre, says an Energy Ministry official.

Though economists believe the ongoing outbreaks of Omicron worldwide will reduce global oil prices, the Oil Fuel Fund Office (Offo) still wants to carefully control diesel prices because the fuel is crucial for the transport and industrial sectors.

Diesel price fluctuations can affect the price of goods, putting a pinch on consumers when food prices are hiking, especially for pork.

Money from the Oil Fund, together with a 20-billion-baht loan from commercial banks, should be adequate to subsidise a cap on diesel prices until March 31, said the ministry official who requested anonymity.

Offo has discussed several scenarios with the Excise Department since November 2021 to relieve the financial burden for businesses and households.

Under the worst-case scenario, the government may need to adjust the excise tax as a last resort, said the official.

"If global oil prices remain high, a tax cut may be needed as Offo is not allowed by law to acquire loans worth more than 20 billion baht," said the official.

The authorities currently impose an excise tax on diesel of 5.99 baht a litre, but Offo subsidises the levy by paying 3 baht a litre.

Excise taxes on gasoline and gasohol, a mix of ethanol and benzene, stand at 5.2-5.87 baht a litre.

E85, a type of gasohol with 85% ethanol blend, is charged the lowest rate of 0.97 baht a litre.

Last year the government earned 13-14 billion baht a month on average from the oil excise tax.

Putting a cap on diesel prices of below 30 baht a litre has been a major tool of the Prayut Chan-o-cha administration to cope with higher oil prices since late last year, when many countries started to reopen their borders to tourists.

Higher energy demand in the winter also drove up oil prices.

Offo said earlier the highest prices for Dubai crude oil were recorded in November last year, at an average of US$81 per barrel. In December, after many countries including the US decided to release oil from their reserves, prices fell to $73.3.

Prices rose again and on Jan 18 were above $80.

Opec has yet to increase supply to cool down prices.

Offo currently shoulders debt worth 7 billion baht, following its subsidy programmes, including a cap on standard-sized 15-kilogramme liquefied petroleum gas cylinders at 318 baht to control cooking gas prices.

Praipol Koomsap, a Thammasat University economist and a former assistant to the energy minister, believes high oil prices will not last long as the spread of Omicron is causing many countries to adjust their reopening schemes.

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