The Energy Ministry is confident the entire crude palm oil surplus of 420,000 tonnes can be absorbed by next May with the three measures the cabinet approved on Tuesday.
Energy Minister Siri Jirapongphan said the measures are aimed at tackling the palm oil price slump.
"After all the measures are fully implemented, the price of palm oil should rise to 3.25 baht per kilogramme from 2.50 baht, a jump of 28%," said Mr Siri.
"We will absorb an estimated 440,000 tonnes from the government's three measures, which is more than the surplus."
He said the measures use crude palm oil for power generation and increase its content in various types of biodiesel.
The first measure addresses power generation, for which the Electricity Generating Authority of Thailand (Egat) is planning to tune up and modify generators in two power plants.
Some 160,000 tonnes of crude palm oil will be used at the Bang Pakong power plant, owned by Egat, from December to May, but the ministry has excluded Ratchaburi power plant, owned by Ratchaburi Electricity Generating Holding Plc, from the plan.
"All crude palm oil will be shipped to the Bang Pakong plant, as it is located near the main river. The Ratchaburi plant is too far to form a logistics route," Mr Siri said.
"Egat will buy crude palm oil at 18 baht per litre, higher than the market price of 15-16 baht."
Egat will receive 1.35 billion baht to subsidise power tariffs from the Commerce and Finance ministries at 525 million baht and 829 million baht, respectively.
He said the power generation cost is expected to double to 6-7 baht per kilowatt-hour (unit) from the average tariff at 3-3.2 baht per unit.
The second measure is for biodiesel used in large trucks and buses, of which there are 180,000 across the country.
The vehicles will be fuelled by B20 diesel, which is 20% methyl ester blended with crude palm oil.
Mr Siri said Hino and Isuzu, two Japanese truck and bus manufacturers, have agreed to use B20.
But Isuzu called for the government to introduce additional incentives for B20 as the specifications for this fuel remain unclear for vehicle assemblers.
"The ministry expects to absorb crude palm oil of 200,000 tonnes from the B20 usage. This biodiesel will be discounted by three baht per litre from normal diesel prices," he said.
"B20 will be sold commercially soon, and the ministry forecasts B20 demand will rise 30 times from 500,000 litres to 15 million litres per day."
The third measure is to increase methyl ester in B7 from 6.6% to 6.9%.
"Raising B7's methyl ester content by 0.1 percentage points will absorb 80,000 tonnes of crude palm oil," said Mr Siri.
The Office of Agricultural Economics said the crude palm oil stock should be at 250,000 tonnes.
Thailand has produced 2.5 million tonnes of crude palm oil, 900,000 tonnes of which were used for vegetable oil and 1.3 million tonnes were used in biodiesel for vehicles.
"The global crude palm oil price has dropped to 16 baht per kg, while Thai prices stand at 17-18 baht, so all three measures should help with the surplus level because at the current price Thai firms cannot compete in the export market," said Mr Siri.