Thailand ‘Out of Step’ on Removing Fuel Subsidies

Prime Minister Yingluck Shinawatra's moves to suspend the collection of an excise tax on fuel products and diesel sales has prompted criticism that the government is reverting back to market-distorting subsidies at a time when other Asian nations are trying to shake off their dependence on state-funded measures to keep fuel prices down.

Cutting the excise tax makes fuel cheaper for consumers while depriving the government of revenue for its oil fund, which it uses to lower the cost of other fuel products such as liquefied petroleum gas.  Both Indonesia and Malaysia are slowly moving toward removing fuel subsidies. Indonesia's government last week introduced a new pilot project aimed at limiting the use of subsidized fuels, and aims to cut its subsidy bill to 123.6 trillion rupiah, or $14.5 billion, next year from the 129.7 trillion rupiah it expects to pay this year.

Malaysian authorities are gradually attempting to withdraw subsidies on natural gas in order to push up prices to market-determined levels.  Malaysian fuel service stations will offer bio-diesel fuel by next year, Plantation Industries and Commodities Minister Bernard Dompok told reporters recently. Another step that will assist reducing fuel subsidies.

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