6-Month target for energy price revamp

The Energy Ministry wants to complete the energy-pricing overhaul within six months in the hope that floating the price of liquefied petroleum gas (LPG) for transport and household use as well as increasing the price of natural gas for vehicles (NGV) would drastically cut the Oil Fund's spending for subsidies.

After the float, subsidies for LPG are expected to plunge from about Bt3 billion a month to Bt600 million, Suthep Liumsirijarern, director-general of the Energy Policy and Planning Office, said yesterday.

The details for issuing energy credit cards and coupons should be ready in three to six months, he said.

The increases "will take effect after the energy credit cards and energy coupons are in place, to ease the negative impacts from the higher gas price on taxi and tuk-tuk drivers as well as low-income earners", he said.

 The overhaul follows years of "crossover" subsidies through the Oil Fund. The fund has been promoting purchases of LPG and NGV through levies on petrol, gasohol and diesel sales.

This has drawn criticism over misplaced objectives as well as complaints from all fuel users, he said.

"After this revamp, energy prices will reflect actual costs. Demand distortions will be eliminated and prices will be influenced by the market mechanism. The Oil Fund will then be in charge of only price stability," Suthep said.

This move will also prepare Thailand for greater competition after the Asean market is fully opened up in four years, he said.

Household consumption of LPG runs about 217,000 tonnes per month, including 117,000 tonnes used by restaurants and hotels.

Transport consumption reaches 78,000 tonnes a month, with 20,000 tonnes for taxis, 4,800 tonnes for tuk-tuks and 53,200 tonnes for private vehicles.

The float will push the LPG price for transport and household use up by about Bt12 per kilogram, from Bt18 now. The LPG price for industrial users, which consume 67,000 tonnes a month, was raised by Bt3 in July and a quarterly adjustment of Bt3 will follow.

For NGV, the Oil Fund shoulders monthly subsidies of Bt400 million. The float will affect fleet operators, which own about 26,000 trucks, as well as the drivers of 90,000 personal vehicles.

After the restructuring, the Oil Fund's subsidies will be limited to some public-transport operators and low-income households.

The government will then have to make a decision on whether the subsidies should be borne by the fund or be part of the government budget, Suthep said.

The suspension of Oil Fund levies on 95- and 91-octane petrol and diesel is the first step to cutting the subsidies, as the prices reflect actual costs. This was supported by the cut in contributions from gasohol, which widens the gap between gasohol and non-ethanol petrol prices to Bt3 per litre to promote alternative-energy consumption.

This is also in line with the ministry's plan to scrap 91-octane sales totally.