Business geared up to face fuel price hike

The National Energy Policy Council recently approved a new energy-price structure, which will result in the gradual float of LPG |and NGV prices starting in mid-January.
The retail LPG price is expected to increase by Bt0.41 per litre per month, or Bt4.90 per year, while NGV will increase by Bt0.50 per kilogram per month, or Bt6 per year.
The contribution to the Oil Fund from sales of liquefied petroleum gas for use in the petrochemical sector will increase to Bt1 per kilogram in January.
Paisal Aowsathaporn, vice pre-sident of Oishi Group, a local operator of Japanese restaurants, said last week that floating petrol prices as well as LPG would drive up business costs, as ingredient and transportation costs would go up significantly.
“What we have done to tackle the problem is focus on economies of scale in any purchase of raw food. We have negotiated with key suppliers to lock in prices for the top 20 products by volume purchased by the company,” he said.
Half of the products used in Oishi restaurants are imported. About 70 tonnes of salmon are purchased annually from Norway and Chile, while pork and chicken come from local suppliers, including Charoen Pokphand.
The move would allow the company to escape any price fluctuations caused by unexpected factors next year, he added.
Somboon Prasitjutrakul, CEO of DKSH (Thailand), said almost 80 per cent of all cargo trucks are still using diesel.
“I don’t believe that the government will touch the price of diesel as it will affect the cost of product transportation,” he said.
Logistics and people account for almost half of the company’s operating costs.
“It’s quite difficult and costly for transportation and logistics companies to convert their truck engines from diesel to NGV. There are only a few NGV stations on the street,” he said.
The government’s policy to float the LPG price would seriously |hurt both taxi drivers and manu-|facturers as they use LPG as fuel. The companies need to adjust their operations to focus on cost efficiency to remain competitive in the market.
DKSH’s business is labour in-|tensive and the government’s |policy to raise minimum wages |will also add a serious burden to its costs.
“We would like to urge the government to cut the corporate income tax to help businesses,” he said.
A source from a local soft-drink bottler said the floating of the LPG price would seriously impact its operating costs.
“We use LPG in our 18-wheel trucks, which transport soft drinks from factories to branches and sub-warehouses. All the forklifts in our factories also use LPG,” the source said.
The company’s trucks could be modified to run on NGV immediately. The only problem is that there are not enough filling stations for NGV today, the source said.
Maesai Prabhasavat, president |of the Association of Gas Equip-ment Installers for Vehicles, said more than 500 members of the |association have been urged to |raise their quality standards to cash in on the floating of LPG and NGV prices.
The association will issue a certificate to any member that passes its service quality and equipment safety criteria. The scheme would differentiate them from general installers of gas equipment in the market.
More than 70 per cent of the association’s members are LPG equipment installers, but the association plans to increase the proportion of its NGV equipment installers significantly from 30 per cent to 50 per cent.

DEBATE OVER LPG
Energy Reform, a major gas-equipment installer, recently said it was cutting its sales target this year from Bt1 billion to Bt800 million due to the government’s policy to float the LPG and NGV prices, which will result in a dramatic decline in cars installing LPG equipment.
Industry has felt less of a pinch from the energy price hike as transport represents only 5-10 per cent of total production costs.
Payungsak Chartsuthipol, chairman of the Federation of Thai Industries, said that by letting the LPG price rise gradually, the government was allowing industry to adjust its transportation costs properly.
Only logistics providers seem to experience the greatest impact from the increased cost.
Those in the agricultural sector, such as farmers, will be affected, as they have to deliver their crops to plants or markets.
“Manufacturers can pass on |this increased cost to their customers and finally the products |or services,” he added.
Yongkiat Kitaphanich, executive vice president at Somboon Advance Group, said transportation ac-counted for just 5 per cent of the company’s total costs, as its customers nowadays drive to its factories and pick up the auto parts by themselves.
The Energy Ministry’s policy to hike energy prices does not affect the company’s transportation cost significantly, he said.