The gvt postpones decrease of subsidies of LPG and CNG

The Energy Ministry’s foot-dragging in lifting prices of heavily-subsidised liquefied petroleum gas (LPG) and a move to resist the planned hike in compressed natural gas (CNG), need looking into.

Need looking into ? Indeed. šŸ˜‰ The answer is obvious : short term political gains. And mai pen rai, someone will pay the bill. Later.

Its indecision reflects one of the populist policies which only serve to prevent further political backlash against the Somchai administration, without paying due regard to what is right for the country. By continuing to put off the price increase for LPG for use as an automotive fuel and by defying the price rise in CNG scheduled for next year, Energy Minister Wannarat Charnukul compounds the serious problems related to fuel subsidies.

The heavy subsidies have partly led to the surge in consumption of both LPG and CNG in the automotive sector, as motorists take advantage of price incentives which come at the expense of the national economy to the tune of billions of baht a year.

Officials say the number of vehicles running on LPG rose to 1.2 million at the end of June, from fewer than 80,000 a year ago, as more and more vehicles have been converted to use the gas following the rapid increase in oil prices earlier this year. That pushed total LPG consumption in the first half of this year up by 19.6%, thereby requiring PTT, the state-controlled energy concern, to import as much as 60,000 tonnes of LPG per month, three times the amount it imported in April, when Thailand became an LPG importer for the first time.

Consumption of LPG as motor fuel alone jumped 24% in the past year and even motorcycles are now running on LPG, while some farmers use home-made gas tanks on their farm trucks.

The more LPG consumed, the higher the amount of subsidy paid. LPG has been heavily subsidised by as much as US$600 a tonne – or two-thirds of its actual cost.

LPG prices are fixed at 18.13 baht per kilogramme, equivalent to $322 a tonne, compared to the recent world price of $920/tonne or 52-53 baht/kg based on the recent Saudi Arabian benchmark. (…) (Bangkok Post)

A very good article that summarize the LPG/CNG subsidies problem.

8 Responses to “The gvt postpones decrease of subsidies of LPG and CNG”

  1. 1 Bob 22 October 2008 at 1:38 am

    The WSJ has a different view:

    You can bigotly dismiss it as seeking st. political gains, but in my opinion it was the right choice to decisively diversify energy sources and energy imports in the long run. I will tell you -if the democrats were governing, they would still be at it on what to do….

    -Thank you Thaksin and TRT….

  2. 2 ThaiCrisis 22 October 2008 at 2:37 am

    “decisively diversify energy sources” ? That’s a tasty one. LPG is a sub product… of oil !

    And the local production of LPG can’t cover the consumption… therefore we need to import. More and more.

    Furthermore, to diversify doesn’t mean automatically to subsidize.

    And to subsidize doesn’t mean automatically to subsidize in a silly way.

    Last point : of course the Democrats would have done roughly the same…

    But the energy issue should not be polluted by politics.

    Unfortunatly, stupidity and poor management of the economy is not the prerogative of the TRT/PPP/Whatever or Democrats.

  3. 3 Bedwyr 22 October 2008 at 5:15 am

    TC: quite right. A rather daft post from brother Bob. Perhaps he has been in Thiland too long and has forgotten the widespread Western custom of thinking before speaking.


    ps. Bigotly? what does bigotly mean. perhaps he is a Thai with a trendy western nickname. Odd how many Thais try to impress by adopting nicknames from the despised foreigner isn’t it? if only intelligence were bestowed by changing names the same way Thais believe good luck can be bestowed by changing names…

  4. 4 paperback 22 October 2008 at 8:18 am

    Maybe this is just a hidden (expensive) cleaner air programme. Lure many, many car users into LPG and CNG with price incentives and once you’ve reached a sufficient number of users (or cannot afford to pay the subsidies any more) pull the plug on subsidising. NGV owners will have to stick to their fuel anyway.

  5. 5 ThaiCrisis 22 October 2008 at 8:29 am

    It would be indeed a good fallout (for CNG).

    There is another method : to heavily tax regular gasoline and diesel… like in Europe… in order to subsidize cleaner solutions (like CNG or mass transit system).

    That’s the problem with the thai model : all the fuels must be priced as low as possible.

    It’s just the fallout of the poor energy efficiency of the country.

    Add to this economic reality the factor of easy political gains… the result is a non sensical pricing policy.

    Actually, we can not say that Thailand as a bad energy policy : Thailand has no energy policy.

  6. 6 paperback 22 October 2008 at 8:34 am

    @ ThaiCrisis

    I don’t know the wholesale prices of LPG or CNG as compared to gasoline or diesel if you strip them of all subsidies and taxes: which fuel would be cheapest then?

  7. 7 Bob 22 October 2008 at 3:15 pm

    Obviously you did not read the WSJ or if you did read it you must be blind not to see that it was talking about CNG and not LPG.

    Heavily tax regular gasoline and diesel? [not that the government shouldn’t/hasn’t taken that into consideration] Thailand does not even have adequate mass transit infrastructure to start doing what you propose. The economy will halt. It is better to let shareholders of PTT take the hit than risk a meltdown of the entire economy.

    “The heavy subsidies have partly led to the surge in consumption of both LPG and CNG in the automotive sector, as motorists take advantage of price incentives which come at the expense of the national economy to the tune of billions of baht a year.”

    That’s what is suppose to do! The government knows that. Therefore it is prudent for the government to effectively execute its plan to upgrade mass transit, build nuclear power plants, promote manufacturing of smaller cars etc to address short term and long term energy needs. It will have a hard time executing that plan if people are always staging coups.

    Bed: So what if bigotly is not the word! I got my point across.

  8. 8 l prao 23 October 2008 at 3:48 am

    I converted my Honda Accord to LPG for nearly a year now (approximately Baht 60,000+ conversion cost using Italian Agip conversion kit). My gasoline tab before the conversion was nearly Baht 10,000 +- per month, and after conversion Baht 3,500+-/month. In 10 months I already recovered my conversion cost and the savings by Baht 6,000/month continues.

    There was no perceptible loss in power or performance and I had actually expanded my range because I can switch from LPG to benzine anytime.

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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