THAILAND

Suspension eases high cost-of-living burden

The Finance Ministry may extend the excise tax cut for diesel by an extra month or two to ease pressure on expensive retail oil at a time of soaring global crude prices, says a senior ministry official.

The source, who declined to be named, said the Excise Department and the ministry are weighing the pros and cons of such a move.

The scheme was initiated by the Abhisit Vejjajiva administration in May 2010.

The excise tax levied on diesel was cut from 5.31 baht a litre to half a satang and municipal tax of 53.1 satang waived to serve its policy of keeping the price below 30 baht a litre.

The government estimates the scheme is costing the government 9 billion baht a month in revenue. Thailand consumes 52-53 million litres of diesel a day.

The tax cut was originally scheduled to expire at the end of 2011, but the new Pheu Thai government extended it to the end of this month.

However, crude has been rising recently on the conflict between Iran and western countries.

Iran has threatened to block the Strait of Hormuz, the main route for shipping crude oil from the Middle East.

The price increased yesterday by US$1.01 a barrel to $109.75.

The ministry official said ending the scheme on Jan 31 as planned would place a huge burden on people's cost of living.

Diesel now retails at 31.13 baht a litre, but reinstating the excise tax would see the price shoot up to 36.44 baht overnight.

The source said since the crude price will soften in April in line with seasonally lower demand, that might be a more appropriate time to lift the subsidy.

Meanwhile, energy expert Manoon Siriwan slammed a longer delay for reinstating the excise tax on diesel.

He called such a move inappropriate and said a better use for taxpayers' money would be to finance infrastructure development to raise the country's competitiveness.

However, Anusorn Sangnimnuan, president of the state oil refiner Bangchak Petroleum Plc, agreed with extending the subsidy, reasoning it would help ease people's burden during the global crude price hike.

"The global crude price will likely keep rising through the second quarter," said Mr Anusorn.

"The Finance Ministry should collect the tax on diesel again once the high season ends."

He said the scheme could be prolonged by as much as another three months.

"I support the idea of prolonging it. But end the scheme at the right time or else the loss to state revenue will be too much," said Mr Anusorn.