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OIL PRICES-March 14, 2000

Ministers scramble to ease impact

Broad measures to protect key sectors

Bangkok Post Reporters

For the first time since the oil price started its upward spiral several months ago, ministers and senior officials met yesterday to map out measures to solve what is fast becoming a political minefield for the government.

In yesterday's meeting, the National Energy Policy Committee approved broad measures to cushion the impact of rising oil prices, including lowering diesel prices for certain sectors and increasing the use of natural gas.

Attending the meeting were Finance Minister Tarrin Nimmanahaeminda, Industry Minister Suwat Liptapallop, Transportation Minister Suthep Thaugsuban, Foreign Minister Surin Pitsuwan, PM's Office Minister Savit Bhodivihok, and Commerce Minister Supachai Panitchpakdi.

Mr Supachai, the NEPC chairman, said the oil prices, based on the average crude oil price of US$29 per barrel and the exchange rate of 38 baht to the dollar, are expected to slow down the economic growth rate to 3.66 %.

The National Economic and Social Development Board earlier predicted a 4.4 % growth rate.

The inflation rate, as a result, would increase to 2.59 % from an earlier forecast of 2 %.

The NEPC yesterday approved immediate measures to cushion the impact on fishermen, farmers and small and medium enterprises (SMEs).

For fishermen, the committee agreed to extend from August to the end of this year use of the Committee on Policy and Assistance for Farmers' fund, which now stands at about 160 million baht, to subsidise the diesel price.

To help farmers, the NEPC, the Petroleum Authority of Thailand and the Bank for Agriculture and Agricultural Co-operatives will continue with a project to sell diesel oil to farmers who are the bank's clients at 15 satang per litre lower than the market price.

SMEs registered with the Industry Ministry will also benefit from the diesel price reduction. As another measure to reduce reliance on fuel oil, the NEPC also agreed to increase the use of natural gas. The committee will push for the long-delayed Ratchaburi power plant's opening in June.

Mr Savit will try to hasten the signing of a contract for the PTT to buy natural gas from Burma, which was to be sold to the Electricity Generating Authority of Thailand.

The committee also endorsed the Industry Ministry's proposal to speed up the laying of gas pipelines around Bangkok and nearby provinces.

Energy-saving measures will be promoted among motorists and industrial plants.

The city administration and Bangkok Mass Transit Authority will be urged to use more natural gas in their garbage trucks and buses. The PTT will build six more gas stations to service city buses.

Restructuring of oil prices is another measure to be further discussed.

The Finance Ministry will consider an Industry Ministry proposal for a reduction of import tax on equipment related to the use of gas.

The NEPC also approved in principle the Transport and Communications Ministry's plan to subsidise transport operators for the extra cost of diesel if the price climbs higher than 10.82 baht per litre.

The Transport and Finance ministries will further discuss details of the subsidy. However, the two ministries will have to wait for the outcome of the March 27 meeting of the Oil Producing and Exporting Countries.

The subsidy, if set at two baht per litre, will cost the government about 300 million baht per month.

Industry Minister Suwat said after the NEPC meeting that as a result of lower prices for finished oil products in Singapore, pump prices of gasoline will today come down by 30 satang per litre, but the price of diesel oil will remain the same at 12.82 baht per litre.

The petroleum authority subsequently announced that from today its premium and regular petrol prices in Bangkok and nearby provinces will be 15.69 baht and 14.89 baht per litre, respectively. http://www.bangkokpost.net/today/140300_News01.html

-- (Dee360Degree@aol.com), March 13, 2000