CP Group fears price distortions in a free market

"In the business sector, we have yet to see serious action from the government to push for alternative energy, especially in the farm sector," he said.

In comparison, the US government has adopted a policy of using a third of its corn crop for ethanol production, he said. Brazil has a policy of using 80 per cent of its cane sugar for making ethanol.

"We have plenty of farm products that can be used to make biodiesel and ethanol, such as cane sugar and oil palms," he said.

But the government has not yet moved to copy the US and Brazil. Such moves are lately blamed for pushing up global food prices. Ajva said the government could create a system in the supply chain to ensure that local farmers obtained a share of the benefits. All stakeholders in the supply chain, from farmers to distributors and retailers, should receive equal treatment.

"The government should encourage close coordination between small and big farmers, in order to increase productivity. Small farmers can benefit from the research, know-how and technology undertaken by big farmers," he said.

Ajva said strong inflation and a high cost of living could affect local gross domestic product (GDP), which in the worst-case scenario could experience growth of less than 5 per cent this year. Such a situation could arise if the government fails to tackle the political deadlock peacefully.

He said 5-per-cent GDP would appear to be an optimistic goal.

"I expect high inflation will persist if the oil price remains high. Petrol is expected to touch Bt45 a litre once world prices reach US$150 [Bt5,000] per barrel," he said. "The business sector should be able to adjust to these prices."

The Charoen Pokphand (CP) Group has raised salaries by Bt1,000 to Bt3,000 on average to help staff cope with the higher cost of living.

CP Retailing and Marketing senior vice president Wisade Wisidwinyoo said the company had already raised prices on 30 per cent of its bakery products.

"We're looking at raising prices of frozen foods by Bt2 or Bt3, in order to cope with higher production costs," said Wisade.

He said the company would focus this year on saving energy and improving the efficiency of its plants that make frozen foods and bakery items.

"We'll invest 20 per cent of our sales in improving the plants. About 2 per cent of overall expenditures will be allocated to improving production efficiency," he said.

CP Retailing achieved sales of Bt4.1 billion last year, of which Bt1.6 billion came from bakery sales and the rest from frozen food. The company expects sales to reach Bt5 billion this year, with its bakery items recording 30-per-cent growth, or Bt2.1 billion. Another Bt2.9 billion will come from domestic and export sales of frozen foods.