National Council for Peace and Order spokesperson Pattamaporn Rattanadilok na Phuket said Gen Prayuth said he believed inmates should earn from products they make and sell at the department's annual trade fair.
In addition to being told to reduce the number of overall inmates from the current 290,000, the Corrections Department was directed to figure out ways to produce food by itself.
Food expenses have sent the Corrections Department into the red for four consecutive years.
Miss Pattamaporn said that the NCPO on Tuesday allocated 3.42 billion baht to pay down food-related debts in 2013 and 2014. It also authorised borrowing of 890 million baht to cover ongoing food expenses.
The borrowing will be in addition to the department's regular 2015 budget.