Fuel tax cut needed
The price of oil is a notorious headache for governments around the world. Now, Prime Minister Prayut Chan-o-cha is reaching for the pill bottle with the global price of oil having risen sharply from US$20 per barrel last year to over $80 this week.
Hopefully, the government will be able to deal with this. If not, it could end up in ruins along with the country. The price problem turned more worrying this week when "Truck Power", the haulage group under the Land Transport Federation of Thailand (LTFT), began protesting by driving to the capital. Members threatened to cut working hours if their demand that the diesel price be pegged at 25 baht per litre was not met.
They came away empty-handed after the government refused and insisted on pegging the diesel price at 30 baht per litre. The government also ignored their recommendation that it shave off the 5 baht extra cost right away by reducing taxes or collected fees that come with oil sales.
They are right. It is about time the government rejigged taxes and fee collections on energy, instead of sticking with the old playbook of relying on money from the Oil Fuel Fund or borrowing from the state to keep energy prices low.
The government is running out of money to subsidise energy prices. It spent more than 50 billion baht keeping the price of cooking gas low over the last 18 months of the Covid pandemic and it will spend billions capping the diesel price at 30 baht a litre.
Now, with the Oil Fund only having enough money for subsidies until the end of this year, the Energy Ministry is preparing to borrow 20 billion baht to subsidise diesel, and another sum to keep the cooking gas price low. It is time the ministry tried a new method because there is room for it to reduce energy costs.
For one litre of oil, at least 30% of the cost is tax and collected fees. So, the Energy Ministry can try reducing oil prices by cutting the marketing fee collected or even reducing the use of energy crops as additives.
If this does not work, reducing the excise tax cannot be ruled out. The Abhisit Vejjajiva government did just that a few years ago.
But the ministry insists on using energy crop additives simply because it is committed to promoting the use of biofuel in the transport sector.
Critics, including the LTFT, say the ministry bleeds too much money from the Oil Fuel Fund to subsidise energy crops such as palm oil and ethanol, despite the price per unit of this alternative energy being expensive.
The government has paid attractive subsidies to farmers. In 2018, it used money from the fund to buy palm oil to be used as fuel at electric power plants, just to help shore up the price of palm oil.
The policy might be good for promoting renewable energy and energy crops. Now, palm oil additives are seen as costly and burdensome so policy makers must be ready to make adjustments.
Without flexibility, this government will fail the oil price test, hurting the country in the process.
Bangkok Post editorial column
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