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LPG price to rise by 6 baht over the next 3 months
Bangkok Post – 14 November 2008
VICHAYA PITSUWAN and NAREERAT WIRIYAPONG
Hundreds of thousands of vehicle owners and manufacturers that use liquefied petroleum gas (LPG) as their main fuel will have to pay six baht a kilo more over the next three months, Energy Minister Wannarat Channukul said yesterday.
Having deferred a decision to end the LPG retail price subsidy for transport and industrial users for many months, the National Energy Policy Committee yesterday agreed to incremental increases. The LPG retail price is six baht a kilo less than the actual price because of the subsidy borne by the government and oil refineries.
The committee agreed to increase the price in steps of two baht per month for three consecutive months.
The new rate hike will take effect once it is approved by the Committee on Energy Policy Administration next week.
The domestic production cost of LPG is 11 baht a kilo compared to the imported cost of 17 baht. It has created a huge financial burden because of the surge in demand for LPG in vehicles.
Household users will still pay the cheaper price until the cabinet reconsiders the subsidy in January when the current subsidy programme expires.
The government had fixed the LPG retail price at US$320 (11,200 baht) a tonne when the fuel was at its peak of three times higher than the local price in mid-July.
From January to September, monthly LPG use had reached over 370,000 tonnes. Domestic production is only 350,000 tonnes a month, causing the country to become a net importer since April.
By the end of October, the state's Oil Fund was carrying a total LPG subsidy debt of 7.42 billion baht.
The new rate is expected to cut LPG imports to 62,000 tonnes next month from 100,000 tonnes in November and to 45,000 tonnes in January. By March, imports are expected to cease altogether.
"If [LPG] demand falls in line with our target, we should be able to pay back that retained debt of over 7.4 billion baht by November 2010," Mr Wannarat said. When the new rate kicks in, the Oil Fund will be able to collect 260 million baht more in income within the first month.
Thanit Sorat, head of the Federation of Thai Industries' Logistics Club, said the new LPG rate is acceptable given that petrol prices have fallen, saying only taxi drivers could be affected as transport companies rely more on compressed natural gas (CNG), locally sold as natural gas for vehicles (NGV).
"The timing of the price rise is suitable as oil prices are getting lower, so car owners have choices," Mr Thanit said.
However, as oil prices are expected to skyrocket again in the second half of next year when the global economy picks up from the financial crisis, the government needs to ensure an adequate number of CNG stations and supplies of alternative fuels, he said.
The ministry was setting up new agencies to prevent LPG smuggling to neighbouring countries, prevent inappropriate use across household and other sectors and support public vehicles which want to switch from LPG to CNG.
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