The cabinet on Tuesday extended the reduction in excise tax on standard diesel for another two months and increased the size of the cut, Prime Minister Prayut Chan-o-cha said.
Speaking after the cabinet meeting, Gen Prayut said that from May 21 to July 20 the excise tax on B5 diesel would be cut by five baht per litre.
This is an increase of two baht on the previous reduction of three baht.
The tax cut would cost the state about 20 billion baht in revenue and the Oil Fuel Fund would be about 70 billion baht in the red as a result, he said.
"It is necessary to take care of the people and the manufacturing sector. The government is doing its best to prevent the retail price of diesel from rising in line with global crude oil prices. Otherwise, there will be impacts on the cost of living, the price of consumer goods and transport," Gen Prayut said.
The government would review its policy on the diesel price every two months and would introduce many other relevant measures, the prime minister said.
He also said that the government would consider subsidies for specific groups of fuel users who were most affected.
"We attach importance to diesel because it affects the cost of production, freight transport and public transit services," Gen Prayut said.
Oil subsidies were costly, and people should help by reducing their fuel consumption, he said.
The government earlier cut the excise tax for diesel by three baht per litre, from a total tax of 5.99 baht per litre, from Feb 18 to May 20, to ease inflationary pressure on the public and private sectors.
The tax cut has cost the Excise Department around 17.1 billion baht in total.
A reduction of the diesel excise tax by 1 baht a litre is estimated to cost the government around 1.9 billion baht a month in lost revenue.
The pump price of standard diesel was 31.94 baht per litre on Tuesday in Bangkok and its vicinity.
There is no subsidy for other diesel fuel, including premium. Prices for these ranged from 40.36 to 44.39 baht per litre on Tuesday.