Likely end of subsidy on LPG price for transport sector

 The floating of LPG prices remains government policy to be proceeded with in accordance with the market mechanism ahead of full liberalisation under the Asean Economic Community in 2015, Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said yesterday.

“The government does not want to take money from all the people to subsidise just some groups of people,” he said.

The government has already increased the price of LPG used in the industrial sector, and believes the timing is right to adjust prices for the fuel used in the transport sector too, he said.
However, for household LPG, the price of which is scheduled to start being floated at the beginning of next year, the minister said inflation would be taken into account before reaching a decision.

“If the inflation rate is at a high level, the decision on increasing LPG prices [for household use] will be put on hold. If inflation is within the target range, prices will be gradually increased properly, resulting in less of an impact on people’s living costs,” Kittiratt said.
Currently, the Bank of Thailand’s target range for core inflation is 0.5-3 per cent, while the range for headline inflation is 1.5-4.5 per cent.
The floated price of LPG used in the industrial sector has been gradually increased to Bt24.86 per kilogram.
LPG used in the transport sector has been capped for three months at Bt21.13 per kilo, but the cap is due to expire on August 15.
LPG for household use is priced at Bt18.13 per kilo.
Yanyong Phuangrach, permanent secretary of the Commerce Ministry, said yesterday that if the price of LPG for transport were to be floated after August 15, the increase would likely be in the magnitude of 20-30 per cent.
This would add 0.037 percentage point to the inflation rate over the remainder of the year, and would also raise the rate for the next full year by 0.11 point, he said.
“Therefore, the government should find a measure to take care of the price of LPG used in households. Meanwhile, the fuel used in the transport sector accounts for only 20 per cent of total LPG usage,” he said.
The government should increase LPG prices gradually in an effort to minimise the impact on the cost of living, he added.
Energy Minister Arak Chonlatanon said earlier that the ministry would continue restructuring LPG prices used in the transport sector from August 16 to reflect the real cost.
For household LPG, the ministry will subsidise only low-income earners and is considering which model to follow, he said.
Thailand now consumes 110,000 tonnes of imported LPG and 480,000 tonnes of domestically sourced LPG a month.
The domestic controlled LPG price is US$333 per tonne, while the imported gas referencing world price for July is $593. Floating LPG prices would reduce the burden on the Oil Fund, which currently carries an overall net loss of Bt17 billion.
Meanwhile, the price of natural gas for vehicles could also be floated in a bid to reflect the actual cost.
The price of NGV was capped for three months, from May 16 to August 15, at Bt10.50 per kilo.
Both LPG and NGV prices were originally intended to be floated on a gradual-increase basis from January this year, after decisions made by the National Energy Policy Council.
However, the council’s resolutions were adjusted in an effort not to push too great a burden on to the public’s shoulders after the economy was hit by the severe flooding in the final quarter of last year.