Oil Fuel Fund offers diesel subsidy if excise tax cut ends

The Oil Fuel Fund Office (Offo) says it will continue to subsidise retail diesel prices if the government decides to end the diesel excise tax cut of one baht a litre, which is scheduled to expire today.

The move aims to prevent oil price fluctuations as geopolitical conflicts in the Middle East are expected to drive up global crude oil prices, said Wisak Watanasap, director of the Offo.

He did not reveal the amount of any new subsidy sourced from the dwindling fund.

The fund posted an accumulated loss of 104 billion baht as of April 8, after using 56.4 billion to subsidise diesel, gasohol and gasoline prices, as well as 47.2 billion for subsidies for liquefied petroleum gas prices.

Authorities spent 4.77 baht a litre from the fund yesterday, along with the onebaht per litre excise tax reduction, to regulate domestic diesel prices.

Officials usually collect a diesel excise tax of around 6 baht a litre from motorists who use diesel.

A government vow to keep diesel prices below 30 baht a litre led to a subsidy programme using the fund that ended on March 31.

Diesel prices have increased to 30.44 baht a litre as of yesterday, up from 29.94 baht a litre on April 4, according to PTT Oil and Retail Business.

At the cabinet meeting yesterday, the Finance Ministry did not present a diesel excise tax cut measure to the cabinet.

In a related development, the cabinet yesterday approved the latest reviewed expenditure budget framework for fiscal 2025, with the total budget set at 3.75 trillion baht, a 7.8% increase from the fiscal 2024 budget of 3.44 trillion.

The fiscal 2025 budget includes a deficit of roughly 866 billion baht, up 24.9% from the figure earmarked for 2024.

The government expects net revenue of 3.45 trillion baht in 2025, up 3.6% from 2024.

Regular expenditure amounts to 2.73 trillion baht, up 7.7% from the fiscal 2024 budget, accounting for 72.9% of the total budget.

Investment expenditure totals 866 billion baht, up 21.9% from the previous fiscal year, accounting for 23.1% of the total budget, while expenditure for repayment of the loan principal tallies 150 billion baht, up 26.9% from the fiscal 2024 budget, accounting for 4% of the total budget.

No items in the fiscal 2025 budget require allocation for expenditure to compensate treasury reserves. In fiscal 2024, this portion of the budget was allocated 118 billion baht.

Fiscal 2025 starts on Oct 1, 2024. The government expects the country’s GDP to grow in a range of 2.8-3.8% in 2025 (with an average of 3.3%), supported by continuous export growth in line with the economic recovery and global trade volume, expansion of private consumption and investment, as well as the recovery of the tourism sector.

However, significant risks include the prolonged geopolitical conflicts that may affect the global economy and create fluctuations in the money and capital markets, including declines in fiscal stimulus in the future.

The government expects the inflation rate to range between 1.1% and 2.1% (with an average rate of 1.6%).

The House of Representatives is scheduled to have the first reading of the draft of the annual budget expenditure bill for fiscal 2025 on June 5-6, 2024.