PETROLEUM
YUTHANA PRAIWAN
Cutting the excise tax on diesel, as Finance Minister Surapong Suebwonglee has proposed, is a bad idea and would just waste taxpayers' money for nothing, says a senior Energy Ministry official.
Some senior policymakers in both the Finance and Energy ministries were opposed to he idea, said the official, who asked not to be identified.
Dr Surapong floated the idea last week as a temporary measure to help two hard-hit sectors, transport and fisheries, at a time when oil prices are at record high levels.
The government currently earns 3.45 billion baht a month in excise taxes on diesel, currently 2.30 baht per litre.
"For every one-baht excise tax cut, the state would lose 1.5 billion baht a month which is equivalent to the cost of building new hospital or public library," said the Energy Ministry official. "The government's effort should be directed at alternative fuel development - don't think just about subsidies."
Energy Minister Poonpirom Liptapanlop last week said she supported the tax cut, as long as it was only temporary. Details of the revised tax rate are to be finalised today and proposed to the cabinet for approval tomorrow.
Global crude oil prices are expected to reach US$120 a barrel this week and diesel in Singapore is approaching $145 with no easing in sight.
"There is no sign of global oil prices declining and we don't think that a tax cut of a few baht will do much to ease consumers' suffering from higher living expenses," the official said.
If the government wants to curb consumers' fuel bills, it would be better if it considered using proceeds from the state Oil Fund to subsidise costs, said the official.
However, the Oil Fund has only begun rebuilding its revenues, after paying off 92 billion baht borrowed to subsidise pump prices in 2004-05.
An oil trading executive who asked not to be named agreed that a tax cut was only a short-term fix and that alternative fuel promotion was the best long-term policy.
"The diesel excise tax cut would affect the financial status of the government, which needs money for megaproject investment," he added.
PTT Plc, the majority state-owned oil and gas group, is currently selling diesel for 0.50 baht a litre less than its rivals. The government frequently uses PTT as a tool to cap market prices, to the dismay of other oil companies.
In the first quarter 2008, PTT said its retail oil business lost more than one billion baht.
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