Thai government plans to increase fuel tariff in semptember. (Photo: iStock)
The Thai government is considering raising electricity prices, causing concerns in the industry about potential impacts on multinational corporate investment. Kriengkrai Thiennukul, Chairman of the Federation of Thai Industries (FIT), stated that Thailand's production costs are already higher than neighboring countries, and further increases in electricity prices could push foreign businesses towards countries like Vietnam.
Thailand plans to increase electricity prices by up to 44% in September
The Energy Regulatory Commission (ERC) announced on the 12th that, to alleviate the debt pressure on the Electricity Generating Authority of Thailand (EGAT) and to cope with rising winter natural gas prices, they plan to adjust the fuel tariff component of electricity charges. Three proposals have been put forward, and one will be selected after a public hearing, with implementation scheduled for September.
At the Thai government's request, EGAT lowered electricity prices from September 2021. However, rising international natural gas prices have widened EGAT's overall losses to 98 billion Thai baht (about 2.8 billion USD). Without an electricity price increase, the government would need to subsidize 28 billion Thai baht (about 819 million USD) to assist with debt repayment.
After adjusting electricity prices in January 2024, Thailand's current average electricity price is 4.18 Thai baht per kWh (about 0.122 USD). Post-adjustment under the three proposals, electricity prices would range from 4.65 Thai baht (about 0.135 USD), 4.92 Thai baht (about 0.143 USD), to 6.01 Thai baht (about 0.175 USD) per kWh, representing an increase of 11% to 44%.
Thailand's electricity prices are already higher than those in Vietnam and Indonesia
Kriengkrai Thiennukul pointed out that current electricity costs have placed Thailand at a disadvantage in competitiveness, especially compared to Vietnam and Indonesia, where overall production costs are lower. Vietnam has raised electricity prices twice since 2023, with the current average electricity price at 2006.79 Vietnamese dong per kWh (about 0.090 USD). In Indonesia, the average industrial electricity price in 2023 was 1080.32 Indonesian rupiah per kWh (about 0.077 USD).
According to a report from Thailand's National Economic and Social Development Council (NESDC), FDI in Thailand was only 2.96 billion USD in 2023, placing it at the bottom among ASEAN countries. Kriengkrai Thiennukul warned that if electricity prices are increased according to the ERC's plan, Thailand may lose opportunities to attract foreign investment.
Furthermore, Kriengkrai Thiennukul expressed that Thailand has already faced difficulties coping with rising costs and competition from Chinese enterprises offering lower prices, which has led to the closure of many small and medium-sized enterprises. An increase in electricity prices would exacerbate this situation.
Source: The Nation, Bangkok Post(1), (2)
