21/02/2011 (The Nation) - The government is expected by tomorrow to crack the palm oil crisis without having to spend Bt1 billion to freeze the price, as suggested by the Commerce Ministry.

"I don't think the government needs to spend so much money on the price subsidy," Prime Minister Abhisit Vejjajiva said yesterday.

The palm oil policy committee chaired by Deputy Prime Minister Suthep Thaugsuban, which meets tomorrow, would effectively resolve the shortage of palm oil for cooking, he said. The government has been closely monitoring the supply problem since last year and observed two key factors - soaring global demand and unfavourable weather, which reduced oil palm harvests he said.

After anticipating the shortage, the government gave the green light to import two lots of crude palm oil, he said.

The first lot of 30,000 tonnes has already arrived and been assigned to 10 producers.

"It was found that the [second] order for 120,000 tonnes has not been processed," he said.

Suthep has already been instructed to facilitate the imports of palm oil, he added.

Commerce Minister Porntiva Nakasai defended the delay in the order, saying her ministry and refiners could not agree on the maximum retail price.

The price for a one-litre bottle has been capped at Bt47 while the production cost has surged to Bt41-Bt42, she said.

If the government wants to continue to peg the price, then it has to subsidise about Bt2 a bottle with a total bill of about Bt1 billion, she said.

Without the subsidy, palm oil will likely spike to Bt55-56 per bottle, she said.

The Department of Special Investigation will by Wednesday complete its inquiry into suspected manipulation of production quotas to drive up the price, DSI director-general Tharit Pendit said.

The probe covers the 10 refiners permitted by the Internal Trade Department to produce palm oil at the subsidised price.

Any manufacturers or distributors of palm oil found involved in hoarding will be prosecuted to the fullest extent of the law, he said, adding that the 30,000 tonnes of imported palm oil could not be found in the market.

Pheu Thai Party spokesman Prompong Nopparit said government politicians and businessmen were colluding to create the "artificial" shortage of palm oil.

The DSI should inspect palm oil stocks in Krabi, Surat Thani, Chumphon, Samut Prakan, Samut Sakhon and Samut Songkhram, he said.

Five ships loaded with palm oil were anchored off the coast as if they had an insider's knowledge of pending import orders, he said.

A government figure with the initial "S" was trying to push up the retail price by Bt9 per bottle, he said.

The Thai Oil Palm and Palm Oil Association issued a statement condemning the profiteering campaign.

The supply deficiency should not have happened despite the fact that a new crop of oil palms was entering the market, the statement said.

Even though the Commerce Ministry's Public Warehouse Organisation was slow to execute the import orders, the proposal to allow private importers to supply palm oil would lead to greater market distortion, it said.

The government should allow time for the market to rectify itself, it added.