Energy Ministry keen to maintain subsidies for biofuels

A pickup gets refuelled with biodiesel B20 at a Bangchak petrol station. (Photo by Varuth Hirunyatheb)

The Energy Ministry plans to revoke the seven-year time frame for terminating the subsidies for biofuels, expecting to amend the State Oil Fund Act of 2019 within two years.

Viraphol Jirapraditkul, director of the Energy Fund Administration Institute (EFAI), said Energy Minister Sontirat Sontijirawong told the Prime Minister's Office to consider amending the revised act to maintain price subsidies for biodiesel and gasohol in the country's retail oil market.

The subsidy termination would happen sometime from 2022-26 under Section 55, with subsidies for biodiesel and gasohol from the Fuel Oil Fund terminated in three years.

The time frame can be extended two times, two years each.

Section 55 also noted price subsidies from the fund should decrease during the time frame.

"The energy minister wants to use this subsidy measure to support consumption of biodiesel and gasohol, buying a massive volume of palm oil, sugar cane and cassava that are raw materials for biofuel from Thai farmers," Mr Viraphol said.

"In addition, Thailand can reduce its import volume of crude oil."

He said if the country's oil retail market does not have the subsidy measure to help biofuel, overall oil pricing and energy security will suffer.

"The government needs to discuss in further detail with stakeholders about which sections will be revised and how the ministry will amend the new version of the act," said Mr Viraphol.

"The government has to consider how to prevent smuggling imports of biofuel from neighbouring countries."

He said this plan and process will take roughly two years, so the seven-year time frame for subsidy termination remains in effect until it is legally changed.

"The EFAI is proceeding with subsidy reduction in 2020, complying with the current act, so biodiesel B10 and B20 will no longer have a lower price than B7 by 2 and 3 baht per litre, respectively, because it would affect the fund's balance sheet," said Mr Viraphol.

"B10 will become more popular in 2020, with consumption reaching 50 million litres per day, while the fund subsidises the B10 price at roughly 3 billion baht per month."

The fund has a cash balance of 36.8 billion baht.

For gasoline, the ministry will soon terminate gasohol 91, promoting E20 as a fundamental petrol, requiring a higher subsidy for E20 to promote local consumption.

The fund will collect a higher levy for users of gasohol 95, he said.

Mr Viraphol said the fund's revenue in 2020 will decline because of reduced levy collection from gasoline users, including gasohol 91's termination in mid-2020.

However, the liquefied petroleum gas price has decreased from the coronavirus outbreak, so the fund will lower the subsidy for local cooking gas.