The state-run Electricity Generating Authority of Thailand (Egat) has been ordered to purchase a new block of 200,000 tonnes of crude palm oil in May and June to increase the domestic prices of fresh palm nuts and crude palm oil.
The government hopes to push the price up to 2.80-3 baht per kilogramme for fresh palm nuts and 16 baht/kg for crude palm oil in May, rising from 2.19 baht/kg for fresh palm nuts and 15.31 baht/kg for crude palm oil in April.
Egat will use 45,000-50,000 tonnes of crude palm oil per month for power generation at its Bang Pakong plant in Chachoengsao.
The National Oil Palm Policy Committee, chaired by Deputy Prime Minister Prawit Wongsuwon, on Thursday approved a proposal to purchase crude palm oil by Egat, said Energy Minister Siri Jirapongphan.
"The plan will be proposed to the cabinet next Tuesday," said Mr Siri.
Earlier, Egat completed the purchase of 160,000 tonnes of crude palm oil for power generation from 31 distributors.
He said the committee approved on March 13 PTT Plc absorbing 100,000 tonnes of crude palm oil to produce and export biodiesel, in another attempt to raise prices on the domestic market.
All measures are aimed to absorb a surplus of 400,000 tonnes of crude palm oil, from a normal stock of 250,000 tonnes.
Jariya Sutthichaiya, secretary-general of the Office of Agricultural Economics, said Thailand's prices are lower than Malaysia's at 2.70 baht/kg for fresh palm nuts and 16.46 baht/kg for crude palm oil.
"The committee told the Commerce Ministry to establish a sub-committee to construct price structures for fresh palm nuts and crude palm oil," she said.
The sub-committee will monitor output and stockpiles from 144 factories after Egat purchases the first lot of 100,000 tonnes in May.
"There was high output, equal to 10% of palm nuts from March and April, which brought low prices for both fresh palm nuts and crude palm oil," said Ms Jariya.
The output of fresh palm nuts in 2019 is projected at 16.8 million, up 9% from 15.4 million tonnes in 2018.
The stockpile of crude palm oil in April stood at around 300,000 tonnes.
A source from energy policymakers who requested anonymity said PTT is considering buying 100,000 tonnes of crude palm oil by December to blend for 10% biodiesel (B10).
"More details have to be determined, but a purchase plan will be proposed by June," the source said.
PTT is conducting a market response test for B10 to compete with pure diesel. PTT had proposed a production plan of methyl ester from crude palm oil for B100, but the board suggested the material cost in Thailand was higher than for producers in Malaysia and Indonesia, so that plan was scrapped.