The excise tax on diesel is 0.005 baht per litre since the cabinet three years ago approved a rate reduction from an effective rate of 5.31 baht in order to ease the burden on people as living costs rise.
Excise Department director-general Somchai Pulsawas said that if the cabinet fails to extend the diesel subsidy this month, diesel will be taxed at its ceiling rate of 10 baht automatically by law.
The retail price of diesel yesterday was 29.99 baht per litre.
Mr Somchai said the department is ready to extend the low excise rate on diesel but it must depend on the government.
The Finance Ministry is awaiting an answer from the Election Commission to suggest whether a move to extend tax reductions ahead of a fresh election is against election law.
"We are not sure if this policy, which has been used for three years, should be regarded as an old one that can be continued or as a government policy that uses the state's resources that benefit a political party," said Mr Somchai.
Electoral regulations prohibit the government from using state human and financial resources, directly or indirectly, ahead of a general election.
The excise tax cut on diesel has reduced the state's tax income by more than 100 billion baht per year.
Meanwhile, the Energy Ministry has denied supporting the Finance Ministry's request to extend the excise tax subsidy for diesel.
A source said the Finance Ministry had earlier asked for the state-owned Oil Fund to support the extension of the subsidy.
However, the Energy Ministry had to turn down the request because the Oil Fund already has a liquidity problem as it has been used as the only tool for oil price subsidies.
The fund has slightly more than 1.7 billion baht remaining with a burden to subsidise the diesel price at 70 satang per litre or 165 million baht per day. This means it can continue the subsidy for only 10 days.
Energy permanent secretary Suthep Liumsirijareon said the Oil Fund is seeking loans of 20 billion baht from Krung Thai Bank and 10 billion from the Government Savings Bank.
"Global oil prices are increasing sharply during the winter season, prompting us to seek loans to support the government's measure to keep the diesel price at no more than 30 baht a litre," said Mr Suthep.
The global oil price is likely to rise further as the US economy is recovering, while about 1 million barrels per day of crude oil supply in Sudan have been disrupted.
The disruption of natural gas supply from Myanmar from Dec 31 to Jan 14 means more diesel will be required as a substitute during the period, said Mr Suthep.