Too early to say if diesel tax cut will continue: Finance Ministry
The Finance Ministry has declined to say whether the diesel tax cut, which is due to expire on July 20, will be extended, triggering uncertainty about the continuation of measures to mitigate the cost of living.
The caretaker government imposed a diesel tax cut of 5 baht per litre on February 5 last year to tackle rising global fuel prices, resulting in 158 billion baht lost in diesel tax revenue.
The diesel price, which peaked at 35 baht per litre, currently stands are 32 baht/litre.
Finance Minister Arkhom Termpittayapaisith said on Monday that with two months remaining on the current subsidy, it was too early to say what would happen next.
The Ministry agreed to take a loss in revenue to help the transport sector and the people, he said, but needed to base any decision on the decline in fuel prices.
"If we continue the diesel tax cut, we must also look at the constitutional rules of what caretaker government can do," he said, adding that permission on budgeting would first need to be sought from the Election Commission as it could affect the next government.
Meanwhile, Oil Fuel Fund Office director Wisak Wattanasap said the office has been ordered to conduct a scenario analysis of fuel prices for the caretaker government and the new government.
He said the office has predicted two scenarios based on a global diesel price of US$90 per barrel and a currency exchange rate is 33-35 baht against the dollar as follows:
• The diesel price can be maintained at 32 baht per litre by reducing the Oil Fuel Fund revenue collection by 5 baht per litre.
• If the government wants to reduce diesel prices further, imposing a tax cut programme is necessary.
Instead of raising the diesel tax by 5 baht per litre immediately, he said it can be raised gradually by 2-3 baht per litre with the cooperation of the Oil Fuel Fund.
According to a source from Energy Ministry, the Oil Fuel Fund was 69.42 billion baht in debt as of May 28, of which 22.92 billion baht was the result of subsidies for diesel and 46.50 billion baht from subsidies for liquefied petroleum gas.
"The Oil Fuel Fund has borrowed 50 billion baht," the source said, adding that the fund is expected to get another 20 billion baht loan in the middle of June.
The source said the Oil Fuel Fund can generate 1.3 billion baht in tax revenue per month, thanks to a decline in global fuel prices.
The global diesel price at the beginning of May was $86.42 per barrel, down $10.70 month on month, the source said.
The source said the Energy Ministry would have a clearer picture of the continuation of the diesel tax cut in the middle of June based on several factors, such as global fuel prices, the Opec+ meeting on oil production capacity, the US move to raise the debt ceiling and Federal Reserve's move to adjust the interest rate.
However, the ministry will not raise diesel price by 5 baht per litre immediately as it will affect people and the transport sector, the source said, adding that it could trigger an increase in product prices.
The Federation of Thai Industries vice president Isares Rattanadilok na Phuket said the Finance Ministry should extend the diesel tax cut to prevent an impact on transport costs, product prices and the cost of living.
The diesel tax could be cut by 3-4 baht per litre in line with a decline in the global diesel price, he added.
