He was in Singapore for a two-day conference on biofuels.

Along with India, Thailand is spearheading the move in Asia as Europe takes the lead in a global shift towards biofuels, which are renewable and more environmentally-friendly than fossil fuels, although more expensive.

Despite Thai failure over the past decade to replace petrol and diesel with ethanol due to large swings in crude oil prices, Ruangsak is confident that this time it will succeed.

"Our target is not only ethanol price stability, but we would like to secure the environment also. Apart from that, we can...reduce imports of oils that will effect our economy."

Bangkok is putting various policies in place, including excise tax exemption for ethanol and income tax waiver for investors for the first eight years and reduction in income taxes to 50 percent for the following five years.

Bangkok has already approved five ethanol projects, with total production capacity of 800,000 litres/day.

It plans to boost the output to two million litres/day in the next four to five years from initial target of 800,000 as it encourages blending ethanol up to 10 percent into petrol, instead of toxic additive known as methyl tertiary butyl ether (MTBE).

Distilled from renewable crops, such as sugarcane, ethanol as fuel reduces greenhouse gas emissions. It is also a clean replacement for MTBE that seeks out and pollutes groundwater.

HUGE FARM SURPLUSES

Ruangsak said Thai consumers, who currently use about 20 million litres of petrol a day for transport, were likely to opt for the bio-fuel, called gasohol, as it would be priced 0.5-0.7 baht litre (1.2-1.6 U.S. cents) below conventional petrol.

Unlike in Europe, where fuel ethanol is now produced mainly from rapeseed, or the United States which uses corn, Thailand wants to use cassava, also known as tapioca, and molasses made from sugar cane.

Ruangsak said this would help absorb the country's annual surpluses in cassava of 2-4 million tonnes and hundreds of thousands of tonnes of molasses, made from sugar cane, which has depressed the commodity's price.

"Normally we export raw materials outside Thailand. There are no reasons why we cannot convert them into more value-added products," he said. "If we can produce more at low costs, we can export also ethanol."

The government could also save about 300 million baht ($6.98 million), which it currently spends per year to help farmers cope with very low cassava prices.

While Thai cassava output is about 18-20 million each year, its exports are about 14 million tonnes, leaving 2-4 million tonnes of surplus. Domestic consumption is about two million.