July 17, 2014 / 8:31 AM / 3 years ago

Thai military aims to finalise energy reform in two weeks

BANGKOK, July 17 (Reuters) - Thailand's military government is finalising details of energy reform, which include plans to improve the position of the State Oil Fund and restructure domestic fuel prices from a highly regulated system to a market-based one.

Domestic energy prices in Thailand have been distorted by various populist policies under previous governments through the Oil Fund.

Previous attempts to restructure energy prices failed because of strong public opposition and the need for politicians to maintain their voting bases.

Since it seized power in May, the military has discussed with several energy-related officials how to reform the sector and all parties have agreed that fuel prices should be restructured in the interest of fairness, a military official said.

The reform plan has been submitted to the junta leader, General Prayuth Chan-ocha, for consideration, which is expected take up to two weeks, Air Chief Marshal Prajin Juntong, deputy head of the military council, told reporters.

"This is aimed at reducing the financial burden of the State Oil Fund," Prajin said after meeting with the Energy Planning and Policy Committee on late Wednesday.

To boost cash flow to the Oil Fund, the committee also agreed to collect 1 baht per litre on sale of diesel, which will raise the fund's daily cash inflow to 33 million baht, from a current outflow of 27 million baht, Prajin said.

The collection will be done via a cut in the oil retailers' marketing margin for diesel by 1 baht, to 1.50 baht a litre, he said.

The fund, which is not part of the national budget and is overseen by the energy policy committee, now posts a negative balance of 8.8 billion baht ($273.63 million) due to subsidies on various types of fuels like liquefied petroleum gas (LPG).

Major cash inflows to the fund come from gasoline and gasohol users, while LPG users contribute different amounts. Proceeds from the fund are also used to subsidize users of alternative fuels.

State-controlled PTT Pcl, the country's sole gas supplier, has to import LPG at the global price and sell it at a fixed price of $333 a tonne, while the Oil Fund has to levy tax on gasoline users to compensate PTT.

Prices of LPG for cooking have been raised to 22.63 baht per kg to reduce the huge subsidy burden carried by the Oil Fund, but the junta decided to scrap a plan to float the LPG prices until the new energy reform policy is completed. ($1 = 32.1600 baht) (Reporting by Khettiya Jittapong; Editing by Robert Birsel)

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