B20bn loans to bolster diesel subsidy

02-Dec-2021 Intellasia | BangkokPost | 5:02 AM Print This Post

The Oil Fuel Fund Office (Offo) is preparing to obtain loans worth 20 billion baht from 10 commercial banks, following the government’s approval to seek loans to support its subsidy programme during the global oil price surge.

Offo director Wisak Watanasap said the Offo board approved a 20 billion-baht loan to support the Oil Fund capping diesel prices at less than 30 baht per litre, in line with an order from prime minister Prayut Chan-o-cha.

Bangkok Bank, Siam Commercial Bank, the government Savings Bank and Krungthai Bank are the key lenders.

Global oil prices rose rapidly after the easing of lockdown measures and the reopening of many countries to restore their economies, which led to higher demand for oil.

Wisak said of the total budget to subsidise diesel prices, 9 billion baht would come from the state Oil Fund and another 20 billion would come from loans. The subsidy calculation was based on a Dubai crude oil reference price of $90 per barrel.

The government will be given a three-year payback period for loans it receives from commercial banks, he said.

Once global oil prices decline, the government may not reduce the domestic oil price in order to collect levies from motorists for loan repayment, according to the Offo.

If global oil prices continue to increase above $90 per barrel, the Offo may consider seeking another 10 billion-baht loan. If global prices remain high until the second quarter of next year, authorities may need to consider cutting the excise tax to help provide relief for cost of living, said Wisak.

Another measure to control retail oil prices in Thailand is a reduction in the proportion of palm oil-derived methyl ester to only 7 percent starting today. Use of 10 percent and 20 percent methyl ester blended diesel has been postponed from today until March 2022.

The subsidy programme is expected to keep diesel prices below 28 baht per litre.

https://www.bangkokpost.com/business/2224431/b20bn-loans-to-bolster-diesel-subsidy

 

Category: Thailand

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