Gov’t balks at plea to increase tariff rate on imported ethanol

GOVERNMENT OFFICIALS are hesitant to grant local ethanol producers’ petition to raise tariffs against competing imports.

Officials from the Tariff Commission, as well as of the Trade and Energy departments said at a hearing yesterday that raising tariffs on imported ethanol might hurt consumers, especially since local producers cannot sufficiently cater to the country’s demand.

The hearing was held to gather positions on the petition submitted by the Ethanol Producers Association of the Philippines (EPAP).

The group -- backed by the Sugar Regulatory Administration, the Confederation of Sugar Producers’ Association, Inc. and the Trade Union Congress of the Philippines -- had asked that the tariff rate on anhydrous ethanol used for gasoline blends be raised to 20% from 1%.

EPAP argued that investors will come in and build ethanol plants only if government grants them this assurance.

"[But] this will be the dilemma: right now, there is a supply gap," Tariff Commissioner Edgardo C. Abon said at the hearing.

The two ethanol producers currently operating -- San Carlos Bioenergy, Inc. and Leyte Agri Corp. -- can generate only up to 50 million liters per year, EPAP said.

This falls short of the domestic requirement of 200 million liters.

Trade Assistant Secretary Ramon Vicente T. Kabigting similarly said that the protection, if granted, will mean added costs to consumers and might discourage them from choosing ethanol-blended gasoline.

"We are concerned about [the impact] on the price of fuel," Oil Industry Management Bureau director Zenaida Y. Monsada said.

Ms. Monsada also pointed that the current rules require oil firms to patronize ethanol from local producers over imports anyway.

Under the Biofuels Act of 2006 and its implementing rules, oil firms must comply with a mandated gasoline-ethanol blend by sourcing from local producers.

Only when there is a shortage does the government allow imports to come in at 1% tariff.Otherwise, the tariffs on ethanol stand at 10%.

EPAP executive director Tetchi C. Capellan conceded that hiking ethanol tariffs to 20% may cause pump prices of 10% ethanol-blend gasoline to rise to P38.48 per liter versus the P37.99 price at a 1% tariff.

But this price increase, she argued, is minimal and can be done away with once the country is self-sufficient in ethanol.

The current assurance provided by law that oil firms must buy from local ethanol producers, Ms. Capellan argued, is not enough to convince some 25 interested investors to push through with their plans.

Investors are worried that they will have to sell their ethanol to oil firms below the cost of production, she said. It is hard to negotiate a price with oil firms when already, a liter of locally made ethanol is P7 more expensive than its imported counterpart.

"The arithmetic appears to be discouraging investors," she said.

Stakeholders will have up to Nov. 11 to submit their positions to the Tariff Commission, which will in turn forward its recommendation to the interagency Committee on Tariff and Related Matters (CTRM). The President is to have the final say on the matter, based on CTRM deliberations. -- Jessica Anne D. Hermosa

source: beta.bworldonline