By Reyan L. Arinto
TACLOBAN -- The high cost of molasses and stiff competition from imports have forced Leyte Agri Corp. to temporarily stop production of bioethanol.
“Sugarcane planters prefer to convert their canes to sugar because the price they get from sugar mills is higher,” Ruben G. Villanueva, chief operations officer of Leyte Agri, said in an e-mail to BusinessWorld.
Farmers earn P400 more per 50 kilograms if they sell to sugar mills instead of Leyte Agri, the official said.
Ethanol is derived from locally grown crops such as sugarcane, corn, cassava and sweet sorghum. Ethanol use is seen as one way to ease the country’s dependence on oil imports and help achieve energy self-sufficiency.
The Biofuels Act of 2006 requires gasoline sold at the pumps to have 5% ethanol for the first four years. The mix is supposed to be increased to 10% by next month. At the current 5% ethanol blend, local supply is already tight and oil companies prefer to import from Brazil, discouraging local investors from putting up ethanol distilleries.
The P35-million Leyte Agri facility in Ormoc, which opened in 2008, used to produce 10,000 liters per day. If cane production and plant efficiency increase, it has the potential to produce 15,000 to 20,000 liters per day.
“If we will continue with our production, we would be losing P45 million up to P50 million per year,” Mr. Villanueva said.
Aside from the high cost of molasses, a major raw material for ethanol production, competition from imported ethanol has also forced Leyte Agri to stop production.
“The government has failed to impose a 20% tariff on ethanol and the local industry has been affected by this situation. I appeal to the national government to regulate the importation of ethanol and [use a price index based on the price of molasses],” Mr. Villanueva added.
“The biofuel industry has some potential but not today. Maybe in the future. Unless cane production and efficiency increase, we cannot compete with imported ethanol,” Mr. Villanueva said.
Mr. Villanueva, however, clarified that Leyte Agri, being a small manufacturer of bioethanol, does not have the same problems as bigger players in the industry.
Leyte Agri continues to produce ethyl alcohol. “We can still revive our ethanol production if it becomes viable this year,” he said.
In October last year, San Carlos Bioenergy, Inc. shut down its bioethanol plant in San Carlos, Negros Occidental, which has a capacity of 40 million liters a year, following the end of the sugarcane harvest.
The other supplier is Roxol Bioenergy, Inc., which has the same capacity.
The Department of Energy had said it would find a way to compel oil companies to buy local ethanol before being allowed to import the shortfall in supply.
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