Govt cuts diesel tax in half
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Govt cuts diesel tax in half

Move aimed to offset global price surge

Trucks stop along Vibhavadi Rangsit Road near the Energy Ministry, Bangkok, on Feb 8, 2022 as part of a renewed protest against high fuel prices. (Photo: Wichan Charoenkiatpakul)
Trucks stop along Vibhavadi Rangsit Road near the Energy Ministry, Bangkok, on Feb 8, 2022 as part of a renewed protest against high fuel prices. (Photo: Wichan Charoenkiatpakul)

The cabinet on Tuesday agreed to cut the excise tax on diesel by three baht per litre, from the current 5.99 baht, for three months to help ease the impact of high energy prices on the cost of transport and consumer goods.

Government spokesman Thanakorn Wangboonkongchana said the cabinet had approved halving the price until May 20 as soon as the order is published in the Royal Gazette.

As a result of the reduction, the Excise Department will lose some 17 billion baht in tax revenue, Finance Minister Arkhom Termpittayapaisith said, adding that the cut was another measure to ease the impact of high oil prices on people, in addition to the Oil Fund being used to help cap oil prices at 30 baht a litre.

However, drawing money to subsidise retail prices has already led to a lack of liquidity, Mr Arkhom said.

Even though the cabinet has given the fund the green light to seek loans of up to 30 billion baht to support the subsidy scheme, the fund is still not in a position to seek loans just yet while it transitions from a legal entity under the Energy Ministry to a public organisation.

However, the fund should be able to seek loans by next month when the transitioning process is completed, Mr Arkhom said.

He said that the government has decided to extend the diesel price subsidy until the end of May as global oil prices are expected to rise further, in part because of the crisis in Ukraine.

But after May, global oil prices are expected to decline while the domestic economy is likely to have improved, so the government should be in a position to collect revenue from other sources to offset the reduction in revenue from excise tax on diesel, he added.

A source at the cabinet meeting said Energy Minister Supattanapong Punmeechaow explained to the meeting that the tax cut doesn't mean that prices at the pumps will fall by the same amount because part of the excise tax revenue is still needed to support the cash-strapped Oil Fund.

However, the tax cut will play an important role in maintaining the 30 baht per litre price cap, the source quoted the minister as saying.

Deputy Finance Minister Santi Promphat said the campaign by lorry operators led by the Land Transport Federation of Thailand seeking the removal of Mr Supattanapong over the high diesel price had not been responsible for the decision to cut the tax.

Sanan Angubolkul, chairman of the Thai Chamber of Commerce, welcomed the move, saying that reduced operating costs for business operators would hopefully be passed on to consumers.

Kriangkrai Tiannukul, vice-chairman of the Federation of Thai Industries, said rising crude oil prices are among external factors beyond Thailand's control, partly because output has failed to keep pace with rising demand by countries pursuing economic recovery following the Covid-19 pandemic, and the recent tensions between Russia and Ukraine.

The Oil Fuel Fund Office (Offo) previously paid 7 billion baht a month to ensure the diesel price was capped at 29.94 baht a litre, and below the inflated market rate of 33.73 baht.

The Offo also fixed the price of LPG at 318 baht per 15-kilogramme gas cylinder, compared with the global market price of 432 baht.

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