The Energy Ministry is pressing for an increase in the content of crude palm oil in biodiesel to curb slumping palm oil prices after several rounds of discussions failed to deliver a compromise.
The urgent action is meant to absorb a surplus of palm oil in the country.
Thailand has produced 2.5 million tonnes of crude palm oil, with 900,000 tonnes going to vegetable oil for consumption and 1.3 million tonnes serving biodiesel for vehicles.
The surplus of crude palm oil stands at 300,000 tonnes for 2018.
Siri: Producers must comply
The methyl ester (ME) content is produced from crude palm oil and blended with the fuel. The current retail biodiesel is called B7, blended in a range of 6.6-7% ME.
Energy Minister Siri Jirapongphan said the ministry wants to increase the ME range to 6.8-7.2% and local biodiesel makers must comply with the new content.
"It is still B7, but we can absorb 80,000 tonnes of the crude palm oil surplus for the remainder of this year," Mr Siri said.
A previous plan for B7+, blended with 7.2-7.3% ME, was already shot down, he said.
Crude palm oil prices have declined to a new low because of a European ban on imports from Asia.
The palm oil price in Thailand cratered to 2.5 baht per kilogramme this year from almost four baht per kg in 2017.
B7 has been available since July 2015, an upgrade from B5 as the government aimed to absorb the massive surplus of crude palm oil.
Pure biodiesel, known as B100, is made by five companies: Patum Vegetable Oil, Global Green Chemicals, New Biodiesel, Bangchak Biofuel and Energy Absolute.
B100 production in August stood at 3.9 million litres a day, down 7.3% year-on-year. The country's diesel distribution in August rose by 1.2% to 61.5 million litres a day, according to the Energy Business Department.
Mr Siri said the ministry has encouraged truck operators to use B20, blended with 20% ME, since July, projecting B20 consumption of 3 million litres a month.
The Energy Business Department reported that B20 consumption in old trucks is undergoing a trial project at a volume of 7.7 million litres.
The Transport Ministry has already used B20 in a trial test for five public buses operated by the Bangkok Mass Transit Authority and three long-haul buses operated by Transport Co.
Transport Co plans to run the test for a month to forecast B20 consumption in the future.
"We expect to absorb a large volume of crude palm oil, up to 1.7 million tonnes a year once we can use B20 in public transport," Mr Siri said.
The ministry set the B20 retail price at three baht a litre below that of B7, and it is exempt from levy collection for the State Oil Fund.
The State Railway of Thailand also had a test run for diesel locomotives using B10 in March on the 30km Ban Laem-Mae Klong route in Samut Sakhon and Samut Songkhram, but the project could not absorb the huge surplus of crude palm oil.