Thailand has abandoned attempts to cap domestic fuel prices that have been pushed up by the Middle East war, and instead will offer targeted assistance for the sectors hardest-hit by high prices.
The government will let domestic energy prices move in line with market forces, Finance Minister Ekniti Nitithanprapas told a television news show on Wednesday, adding that price suppression had led to market distortions, hoarding and unnecessary budget losses.
The government on March 2 announced price caps on the most widely used transport fuels, saying it would not let diesel move past 33 baht a litre.
As a result, the state Oil Fuel Fund spent 20 billion baht in the space of three weeks to subsidise fuel prices at a rate of about 1 billion baht a day. But subsidies continue to climb, reaching 27 baht per litre for diesel and 9.70 baht for petrol, and now cost the fund about 2.5 billion baht per day.
Instead of using the oil fund, the government might consider lowering the excise tax on fuels to keep prices down, Mr Ekniti said on Tuesday.
It is not yet known when prices at the pumps will start rising above the capped levels.
Prime Minister Anutin Charnvirakul on Wednesday sidestepped questions about a potential public backlash to the policy change, offering only a brief acknowledgment of the impact on household costs.
“It will have some impact,” he said before quickly heading into a parliamentary session. “Everybody is working their hardest.”
Mr Ekniti said state assistance would instead be provided to the poor, drivers, farmers, fishermen, contractors and operators in sectors directly affected by the energy crisis.
People whose income is less than 100,000 baht a year are to receive monthly handouts to help reduce their burden from purchasing food, power and cooking gas.
About 13.4 million Thai people are in this group and the Ministry of Finance is studying the appropriate amount for aid, Mr Ekniti said.
In the public transport and logistics sectors, about 360,000 truck drivers and 30,000 public transport drivers will receive fuel subsidies. The assistance will also cover the drivers of passenger vans, taxis and motorcycle taxis.
Mr Ekniti also said that the Ministry of Commerce was preparing to offer lower-priced fertiliser to help farmers. About half of Thailand’s fertiliser supplies come from the Middle East and shipments have been disrupted by the closure of the Strait of Hormuz.
The Ministry of Transport, meanwhile, will to provide fishermen with B20 diesel (diesel with 20% palm oil content), which is cheaper than conventional diesel by five baht per litre.
Contractors carrying out projects for the public sector will also receive compensation to offset the rising costs of construction materials as well as fuel to prevent project abandonment and delays.
As well, operators in the industrial and services sectors will be offered soft loans to support their liquidity, Mr Ekniti said.
