Move would alleviate rising living costs
The Federation of Thai Industries (FTI) is calling on the government to extend the diesel excise tax reduction for another three months to slow soaring energy prices and give businesses and households more time to adjust to higher manufacturing and living costs.
The government previously agreed to halve the tax usually levied at 5.99 baht a liter for a period of three months to cap diesel prices at below 30 baht a litre.
Authorities should continue the tax cut, which is scheduled to end on May 20, to help people deal with the energy price pressure, said Kriengkrai Thiennukul, vice-chairman of the FTI.
“Without an extension, the diesel price will increase and drive up prices of consumer products,” he said.
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The tax reduction has been used in tandem with the state Oil Fuel Fund subsidising the diesel price at 11.21 baht a litre as of April 19.
The fund was already 50 billion baht in the red, causing the government to reduce its diesel price subsidy from next month.
The government may decide to subsidise more than half of the diesel price above 30 baht a litre, Energy Minister Supattanapong Punmeechaow said on Tuesday.
This subsidy reduction is expected to increase the domestic diesel price by five baht a litre, causing motorists to buy diesel at around 35 baht per litre, according to the FTI.
The federation said it wants the government to continue with its initial plan to gradually increase the diesel price by 2-3 baht, which will allow businesses and households to better cope with the global oil price surge.
A five-baht rise will increase logistics costs by 15-20% and push up operating costs in the manufacturing sector by 3-4%, said Mr Kriengkrai, with consumers eventually bearing the brunt.
“These costs are rising because of higher oil prices, excluding other impacts from the Russia-Ukraine war, which is also driving up prices of key raw materials,” he said.
The FTI is concerned Thailand will soon encounter high inflation, while huge household debt remains a problem and the pandemic still looms over the country, said Mr Kriengkrai.
The Bank of Thailand earlier increased its assessment of headline inflation for 2022 to 4.9%, exceeding its inflation target framework of a range of 1-3%.
Inflation is expected to peak in the second and third quarters, then gradually decline and normalise next year.