Thailand is considering targeted fuel excise tax reductions for E20 ethanol-blended petrol and B20 biodiesel as the government weighs measures to ease high energy costs while supporting agricultural producers.
Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas said on September 21 that reducing fuel excise tax was one of several options available to the government. However, he stressed that any measure would need to be assessed against Thailand’s limited fiscal space.
E20 and B20 identified for targeted support
Rather than applying a broad fuel-tax reduction, the government is considering targeting fuels with relatively high shares of biofuel, particularly E20 and B20.
E20 is a petrol blend containing 20% ethanol, while B20 is a diesel blend containing 20% biodiesel. Ekniti said a targeted approach could allow an energy-price intervention to also benefit Thailand’s agricultural sector.
The ethanol used in E20 is mainly derived from sugar cane and cassava, while biodiesel production is linked to palm oil. The Finance Minister said this connection could allow support for fuel consumers to extend to farmers supplying the underlying feedstocks.
The proposal remains under consideration. Thailand has not, according to the reported statement, implemented the proposed excise-tax reduction.
Government weighs fuel-price measures against lost revenue
Ekniti said the government has several mechanisms available for managing energy prices. These include using the Oil Fuel Fund, seeking cooperation from oil refineries to use excess refining margins to reduce retail prices, and cutting fuel excise tax.
The government has so far avoided an excise-tax cut because lower tax receipts would immediately reduce state revenue while existing expenditure obligations would remain. Ekniti said additional borrowing could ultimately be required to compensate for lost revenue, making the fiscal consequences an important consideration.
Reuters separately reported that Thailand had already used the Oil Fuel Fund and measures involving refinery margins as part of its response to higher energy costs.
Thailand’s fiscal room remains limited
The Finance Ministry is also considering the timing of any additional support because the current fiscal year is approaching its end.
Ekniti said Thailand had slightly more than 10 billion baht of remaining fiscal space for the current fiscal year. He argued that measures designed to reduce the cost-of-living burden must be balanced against fiscal discipline because a reduction in government revenue could create additional pressure on public finances.
The government is expected to reassess its available fiscal space in the next fiscal year before determining the extent of additional measures. Reuters reported that Ekniti also planned to seek approval for an extension of the country’s consumer subsidy programme at a cabinet meeting on September 22.
The potential E20 and B20 tax measures illustrate the connection between Thailand’s fuel policy and domestic agricultural commodity markets.
For ethanol, sugar cane and cassava provide important feedstocks, while palm oil is associated with biodiesel production. A targeted tax approach would therefore differ from a general reduction in fuel taxation by linking consumer fuel support with demand for agricultural-based biofuels.
Bioenergy Business Analysis
Thailand’s proposal puts biofuel blending policy, fuel affordability and agricultural support within the same policy discussion. Targeting E20 and B20 would potentially direct any tax relief towards fuels that incorporate domestically produced biofuel feedstocks rather than applying an across-the-board reduction.
The main constraint is fiscal. With limited remaining budgetary space and no detailed tax-cut structure announced, the proposal is still a policy option rather than a confirmed measure. Its eventual design would determine how benefits are distributed between motorists, biofuel producers, agricultural feedstock suppliers and government finances.
For Thailand’s ethanol and biodiesel sectors, the proposal is nevertheless relevant because changes to the relative cost of blended fuels can influence the attractiveness of higher-biofuel blends. The government will need to balance that potential sector support against the revenue impact of lower excise collections.
