By J. B. F. Santos
Domestic ethanol producers want the government to raise tariffs on the commodity, claiming this is needed to spur investments amid efforts to wean the country from its dependence on oil.
The Ethanol Producers Association of the Philippines (EPAP), in a statement, said it had written a letter to the Tariff Commission to request that duties be hiked to 20% from the current 1%.
"Unless there is strong government support, investors will remain reluctant to commit billions of pesos into the Philippine ethanol industry," EPAP executive director Tetchi Cruz-Capellan said.
She added that the "local ethanol industry has not progressed much as predicted two years ago because it lacks equity investments and strong political support."
"Without such support mechanism in place, EPAP believes foreign capital will bypass the Philippines and seek countries with more favorable investment climate and stable domestic market."
The industry group said the Tariff Commission would be conducting a public hearing on its request this Thursday.
It said the country has the potential to produce as much as 1.7 billion liters of ethanol annually. The EPAP added that about 70 liters of ethanol can be produced from a ton of sugarcane, or 4,550 liters for every hectare.
Domestic producers make use of sugarcane as the primary source of ethanol, which is blended with gasoline for use in vehicles. The country’s biofuels law mandates that all gasoline sold in the country be blended with 5% ethanol. In 2011 the minimum blend requirement will be increased to 10%.
Roberto S. Kanapi, Pilipinas Shell Petroleum Corp. vice-president for communications, said the proposed tariff hike may help local suppliers.
"We would… welcome [the] availability of local suppliers," he said.
The country’s two operational ethanol plants, San Carlos Bioenergy, Inc. and Leyte Agri Corp., have a combined capacity of 50 million liters.
Estimated current demand, however, stands at 110 million liters and is expected to increase to as much 220 million liters in 2011.
Among the local producers are Roxol Bioenergy, which is slated to contribute 27 million liters next year, and Alto Power, Green Future Innovations, and Cavite Biofuels which have committed to produce some 33 million, 54 million, and 37 million liters, respectively.
Fernando L. Martinez, chairman of Eastern Petroleum Corp., said local supply should be first increased before tariffs are adjusted upwards.
"That (tariff hike request) is premature. The consumer will only be penalized by higher prices," Mr. Martinez said.
The price of local E10 gasoline may increase by about P0.60 per liter, he said.
"International prices are already competitive, while there are enough competitive forces already locally," Mr. Martinez said. "For me, you would only ask for that (higher tariffs) once you have enough local production."
© 2009 BusinessWorld Publishing Corporation.
