The Ethanol Producers Association of the Philippines (EPAP) has asked the government to raise the tariffs on ethanol in order attract more local investments.

In a recent tariff hearing, EPAP stressed that higher ethanol tariffs would facilitate compliance with the Biofuels Act of 2006 which mandates local self-sufficiency of ethanol for the national biofuel program.

The biofuels law was enacted to help wean the country off its dependence on imported fuels and promote clean environment, public health, and job creation in the largely agriculture-dependent rural areas.

In defending the higher tariff on ethanol, Tetchie Cruz-Capellan, EPAP Executive Director, stressed that building an ethanol plant would cost P3 billion.

To meet the huge capital requirement, Capellan said that investors must be offered adequate tariff protection as in India, Indonesia, Thailand, and Brazil.
Brazil, the world’s largest ethanol exporter, levies a 20 percent duty on ethanol imports. "Without strong government support, investors will remain reluctant to commit billions of pesos into the Philippine ethanol industry,” said Capellan.

EPAP further noted that Thailand’s ethanol production is projected to grow from 408 million liters in 2008 to one billion liters in 2011 due to strong government support.

In contrast, Philippine imports of ethanol skyrocketed to $18 million compared to US$4.8 million in 2006. The bulk of these imports were supplied by Brazil, Thailand, Pakistan, the Netherlands, and China.

All of these countries provide a wide range of incentives, particularly massive funding for research and development to aid the growth of their biofuel industries, said Capellan.

The country is still heavily import-dependent and local ethanol supply is insufficient to meet the additive requirement to gasoline in compliance with RA 9367.

Executive Order (EO) No. 449 was signed, reducing the 10 percent tariff to the current 1 percent. Oil companies may avail themselves of the reduced tariff, provided these will be used for the national biofuels program as certified by the Department of Energy (DoE).

Capellan however argued that EO 449 should be repealed, as there are already local ethanol producers operating in the country, with production estimated to reach 80 million liters by 2011 compared to 50 million liters in 2009.

At present, there are two bioethanol plants in the country, supplying 25 percent of the annual domestic demand for bioethanol. By 2010 two more ethanol plants Green Futures Innovation and Alto Power are expected to be built.

The Tariff Commission raised doubts on the exigency of the proposed tariff hike, pointing out that there are several safety nets provided for the local industry in the Biofuels Act.

“Said law already affords considerable protection to the ethanol industry as it requires oil companies to import bioethanol only to the extent of the local supply shortage,” said Tariff Commission Chairman Edgardo Abon.

To boost investment in the production, distribution and use of locally-produced biofuels the minimum blends, the law also provides financial assistance and exemption from the imposition of specific tax and value added tax.