Thailand's Energy Minister Poonpirom Liptapanlop has said that she planned to revive the diesel subsidy to prevent the rise of diesel prices beyond Bt30 per litre.

She raised options including a cut in the contribution to the Conservation Fund and the use of Oil Fund money to subsidise the diesel price by Bt0.30 per litre. If Poonpirom used all the options she talked about, the diesel price would be subsidised by almost one baht per litre.

The question is whether the subsidy is necessary? And why didn't the energy minister learn from the previous lesson?

In fact, the government should know best the impact of oil subsidies. During the era of deposed prime minister Thaksin Shinawatra, the government's oil subsidy caused the Oil Fund to incur a huge debt,.

The debt was repaid, thanks to the policy of then energy minister Piyasvasti Amranand, who urged the new government not to repeat the same mistake of creating debts in the Oil Fund through subsidies.

Apart from the unnecessary fiscal burden that the oil subsidy would create for the government, the subsidy would also distort the market price. An unrealistic low price would obstruct the effort to achieve efficiency and reduced energy consumption.

As the decision on whether to subsidise diesel is waiting for approval from an energy committee, and won't come until next week, the energy minister has some time to rethink the subsidy policy and whether it is worth pursuing.

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