From Sunday, motorists who have enjoyed the benefits of the diesel subsidy for over a year will have to dig deeper into their pockets because the cash-strapped government can no longer fully provide the subsidy and needs to raise the price from 30 to 32 baht per litre.
Permanent secretary of the Ministry of Energy, Kulit Sombatsiri, recently admitted that the new rate is just the start.
The authority will gradually raise the diesel price by 1 baht per litre in the following weeks until it touches 35 baht per litre. After spending 50 billion baht on the subsidy, the government does not have enough cash to maintain the price at 30 baht per litre.
Obviously, the impact of cutting the diesel oil subsidy will be far and wide. Diesel oil is a strategic fuel -- mainly used in logistics as well as manufacturing and production.
The rise in price will inevitably result in higher costs for goods, food and farm products, the prices of which have been affected by inflation and the energy crisis during the past year.
The Northeastern Transport Association is reporting that more than 700 cargo transport companies operating more than 10,000 trucks will raise cargo transport fees by 20% to cope with the higher fuel costs. The impact on the cost of living will be felt across the board. The operator of a passenger boat service along Klong Saen Saep is also reportedly planning to raise fares by 1 baht from 9-19 baht to 10-20 baht if the diesel price goes up to 31 baht per litre.
While the reduction in the diesel subsidy is understandable and inevitable, we can only hope that the government has prepared measures to soften the impact before it made the decision on Thursday.
Critics since early this year have urged the government to tailor its diesel subsidy in a more targeted manner. One possible solution is a selective subsidy scheme involving discount cards or coupons for specific groups of diesel users that need the help, similar to the co-payment economic stimulus scheme. Without measures to help the logistics and haulage sector, the fuel costs will be passed on to consumers.
Critics have asked the government to lower the excise tax, reduce the market fee, use the local refinery rate instead of that of Singapore in calculating the oil price and above all, suspend the policy of blending palm oil with diesel. Because the energy crisis this time shows no sign of subsiding, the government should address fundamental changes. It goes without saying that truck driver associations and consumer groups have demanded the ministry suspend the mixing policy. This policy has been initiated for over a decade and it was rational when palm oil was cheap during the 90s. Now, palm oil has become pricier, thus making diesel oil unnecessarily more expensive.
So far, the government has not told us what it will do to reduce the impact on consumers. All we've heard is our prime minister, Gen Prayut Chan-o-cha, begging for understanding and cooperation from the public. But it is not the time for the government to ask people to understand or cooperate. It is time to roll out damage control measures, and it is time for our energy policymakers to come out with creative solutions instead of relying on borrowing money for the subsidy.
Without effective damage control, the impact of the rising fuel costs will certainly become a time bomb for the incumbent government.
