Low tariff shuts down biggest ethanol plant

Gov’t inaction blamed for losses

BY JOHN LOURENZE POQUIZ

The ethanol plant of San Carlos Bioenergy Inc., (SCBI) the country’s biggest with a yearly capacity of 38 million liters, will not resume operations unless government increases the tariff on competing imports from Brazil and Thailand, a company official said over the weekend.

The P3-billion plant in Negros Occidental, which started production in 2009, was put up to support the Biofuels Law. Its current woes reflect the government’s indecisiveness in carrying out the law’s mandate of lessening the country’s dependence on imported fuel and of promoting renewable energy resources.

The plant was shut down for maintenance in July. The plant was supposed to go back on stream just in time for the harvest season but the owners decided not to operate it because it was losing money, Jose Ma. Zabaleta, SCBI chairman, said.

"We would like to open (the facility). We’re planning to open but we’re waiting. We cannot continue losing. Government has to adjust the tariff now," Zabaleta, who is also chairman of Ethanol Producers Association of the Philippines, said.

Ethanol producers have long been asking the Tariff Commission to increase the tariff on imported ethanol to 20 percent, from the current 1 percent.

They said they cannot compete with Brazil and Thailand whose producers enjoy economies of scale.

"What happened last year is we started operations and they were very successful operations. But the price of the product was below cost because Brazilian ethanol is coming in at 1 percent tariff," Zabaleta said.

"We lost a fortune. So having lost money, we are at the moment closed. We’re waiting for new developments. We will open if the government gives us the proper tariff," he added.

Bronzeoak Philippines, a unit of Bronzeoak Ltd. of Britain, is the primary developer of San Carlos BioEnergy, together with Zabaleta and Co., a family-owned corporation established in 1997 to engage in sugar farming and agribusiness.

Other shareholders are National Development Co., a state-owned company, and San Julio Realty Inc., which is equally owned by Zabaleta and Co. and Rep. Julio Ledesma.

San Julio is a subsidiary of the joint sugarcane-based business of Zabaleta and Ledesma.

Zabaleta said the ideal tariff for ethanol is about 30 percent.

He said the high tariff would mean more revenues for the government while having negligible impact on fuel users because ethanol is generally cheaper than petroleum.

The Biofuels Act of 2006 mandates that all gasoline products should have at least 5 percent bioethanol blend by volume by 2009, increasing to at least 10 percent by 2011.

The law also mandates that by 2011, all ethanol that would be blended with gasoline should be locally sourced.

Based on the latest Philippine Energy Plan the expected demand for ethanol this year is 219 million liters, doubling to 438 million liters in 2011 when the blend is mandated to rise to 10 percent.

There are only three ethanol plans devoted to producing the product for fueling blending. The two others are Roxol Bioenergy with a capacity of 30 million liters and Leyte Agri with 9 million liters.

Their combined production of around 80 million liters is only about a third of total requirement for blending with gasoline.

Another problem bugging ethanol production is the competing demand for sugar cane from the sugar industry.

In 2002, when there was excess sugar production over demand, government started looking into ethanol production to reduce dependence on imported crude.

But the plan was to keep the cane fields feeding the sugar mills. An additional 100,000 hectares was to be identified by then Agriculture Secretary Arthur Yap to be planted to sugar cane exclusively for the production of the engine fuel substitute.

Yap failed to craft a program that would develop the new cane fields. Up to now there is no such development program.

source: malaya