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National development board urges energy sector restructure

The government should use the current fall in oil prices to speed up restructuring of the energy sector so that local prices will reflect true costs and market levels, the country’s leading development agency said last week.  
 
The National Economic and Social Development Board (NESDB), Thailand’s foremost policy advisory agency, issued a raft of recommendations related to falling prices for oil, and energy in general.  The Board said the government should review its policy on alternative energy to ensure it won’t impose any “unnecessary burden” on the economy.
 
Successive Thai governments have made a commitment to increase alternative and renewable energies in the overall national energy portfolio.  Government policy is to source 25 percent of all Thailand’s energy from renewables by 2021.  Thailand is heavily dependent upon imported crude oil from the Middle East.  At the same time, the Kingdom has become the leader in solar and wind energy in Southeast Asia, although the amounts generated from these renewable sources are still relatively small.
 
In its annual report analyzing the Thai economy, scheduled to be released in mid-February but seen by some reporters, the NESDB urged the government to "speed up the restructuring of energy prices to be able to utilize benefits from the reduction of the world's crude oil prices, for increasing people's purchasing power, reducing costs of business operators and giving better support to the economic recovery."
 
It urged the government to take measures to bring down production costs in the farming sector, and lend greater support for exports and especially commodities exports.  Oil prices affect farmers because many fertilizers are petroleum based.  The Board also suggested price controls for goods benefiting from lower oil prices, saying that controls would stimulate consumption and help ease inflation, which is already low.
 
The Thai government has long subsidized oil and gas prices through taxes on oil and gas retailers, which then go into an Oil Stabilization Fund.  Consumers have complained that the retailers are passing the cost of the tax onto them.  At times this fund has incurred heavy losses because of rising oil prices.  Various think tanks and economists have urged several administrations to scrap the fund entirely and let prices float in line with the market.  But it is a politically difficult move, especially with lower income voters.
 
Industry Minister Chakramon said if crude oil prices fell to an average of $65 a barrel this year, manufacturing output, both for overseas and domestic markets, will rise by 0.41 per cent, because of lower costs. Among the biggest beneficiaries would be the chemicals, plastics, paper and paper products, and food industries.
 
See the original article at Thailand e-Focus.

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