SATURDAY, April 20, 2024

January fuel tariff hike will raise product prices by 5-12%, warns JSCCIB

January fuel tariff hike will raise product prices by 5-12%, warns JSCCIB

The fuel tariff (FT) increase in January will force manufacturers to raise product prices by 5-12%, industry chiefs warned on Thursday.

The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) voiced concern after the government announced subsidies to soften the FT hike’s impact on household utility bills but prepared no such measures for business.

The January-April increase in FT will drive up the cost of electricity to 5.69 baht per unit, the JSCCIB said.

Federation of Thai Industries (FTI) chairman Kriengkrai Thiennukul said the committee estimates that businesses with high power demands such as petrochemical, iron and cement manufacturers will need to hike their product prices by 9-12%, while medium power users like automotive, electronics, sugar, and rubber manufacturers will raise prices 6-8%. Low-power industries such as pharmaceuticals, printed materials and clothing will be able to keep their price hikes to 5% or less, he said.

The FT hike would leave Thailand with the highest electricity costs in the Asean region, Kriengkrai said.

“This could drive multinational corporations to shift their manufacturing bases to neighbours with cheaper power bills, such as Vietnam, which charges only 2.88 baht per unit.”

The committee urged the government to delay the FT hike until the second half of next year, citing the Energy Regulatory Commission’s forecast that Gulf of Thailand natural gas output will rise in the second half of 2023, bringing down the cost of electricity generation.

To make up for the delayed FT hike, the government could raise the loan limit for the Electricity Generating Authority of Thailand (Egat) and grant it a break on revenue contribution, the JSCCIB added.

“With these measures, we estimate that Egat can cover electricity-generation costa [without ft adjustment] for more than two years,” Kriengkrai said.

He also urged the government to decelerate investment in private-power-producer (PPP) projects. He said PPP projects were now far exceeding electricity demand, but the government still has to buy power from them as per the contracts.

The committee estimates the government has to pay PPPs 30.6 billion baht from September to December this year, and around 32.4 billion baht from January to April next year.

“This money could have been used to subsidise power bills for industrial users,” the FTI chief said.