The Thai government has set aside an additional 25 billion baht (US$640 million) to subsidise diesel prices, the Bangkok Post reported.


The Thai cabinet has agreed to allow the Energy Fund Administration Institute, a public organisation under the Energy Ministry, to borrow from local financial institutions.


The extra financing was deemed necessary because there was only 5.2 billion baht remaining in the credit line that financial institutions endorsed for subsidies last January, when the government started capping gasoline and diesel prices. The amount was considered insufficient to continue subsidising diesel prices, Thai Energy Minister Prommin Lertsuridej said.


Bangkok removed the price cap on gasoline in late October.


The latest move confirms the widely-held belief that the government will maintain its policy of subsidising diesel until the end of the first quarter of next year. Diesel is currently capped at 14.59 baht per litre.


Dr Prommin said the oil fund, the government’s tool to subsidise local fuel prices, would need about 7.53 billion baht to maintain the diesel subsidy until the end of January.


With global oil prices still high, the institute estimated that it would cost the oil fund 23.88 billion baht to maintain the cap for the first quarter of next year.


The institute planned to secure long-term financing for the diesel oil price subsidy by issuing bonds in April.