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Source: www.asiaecon.org |

THAI GOVERNMENT PROMOTING ETHANOL USE, INCREASING TAX REVENUES


  In an attempt to promote alternative-fuel development, the government awarded 47 licenses for a total daily capacity of 10 million liters of ethanol. Due to the steep fall in recent oil prices, more than half of the 47 licensees for ethanol production are unlikely to get their production plans going


 

In an attempt to promote alternative-fuel development, the government awarded 47 licenses for a total daily capacity of 10 million liters of ethanol. Due to the steep fall in recent oil prices, more than half of the 47 licensees for ethanol production are unlikely to get their production plans going.

 

Only 11 licensees are now producing ethanol, with a daily output of 1.2 million liters. With the addition of three more companies producing ethanol, Thailand will face approximately a one million liters a day surplus by the end of this year.

 

Compared to other ethanol exporting countries such as Brazil or Vietnam, Thailand has expensive logistics costs of around 25% to 30% of total costs. With Vietnam having an ethanol surplus, Thailand faces another possible international export competitor.

 

Sirivuthi Siamphakdee, chairman of the Thai Ethanol Manufacturers Association, foresees, “a massive surplus of ethanol supply in the coming years”.

 

As a result of the surplus, Thailand faces a possibility that ethanol producers, whose plants have not yet been built, will abandon their licenses, expecting low business profits.

 

To combat Thailand’s investment plans for ethanol production, the Thai Cabinet approved increasing the excise tax on retail oil products as well as discontinuing tax reductions introduced by previous administration.

 

Finance minister Korn Chatikavanij stated, “The government expects to generate additional revenue of THB1.57 billion ($44.9 Million) a month from the tax hike, which will be in effect February 1”.

 

The excise on retail 91-Octane and 95-Octane gasoline would be raised to 5 baht a liter from 3.685 baht, while high sulphur diesel duty would rise to 4 baht from 2.405 baht. The excise on gasohol, ethanol-blended gasoline, will rise to a range of 0.75 baht to 3.317 baht a liter from .0165 baht.

 

Despite the new tax hike, Thai Oil, the country’s largest oil-refining company, foresees no decline in domestic production. Thai Oil had planned to invest 5.1 billion baht in an ethanol plant with production capacity of 500,000 liters a day. The operation is expected to begin in the middle of next year.

 

With the planned introduction of gasohol E85, in which only 15% petrol would be used compared to at least 80% now, Thai Oil sees no halt in production.

 

An executive at Thai Oil shows no worries stating, “If the government allows us to export petrol then there shouldn’t be any problem as demand in the region is still high”. The possible revenue decrease from the oil business is unlikely, as there is always high demand and production capacity.

 

Siamphakdee in similar optimism projects that more than 20 out of the 47 licensees will go ahead with their production plans. He advocates the new tax hikes saying “the law change will help these producers because they can ship the excess ethanol output overseas more easily”.

 

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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