Government slashes import duty on ethanol from 10% to 1%

The government will drastically reduce the import duties on bioethanol fuel from 10 percent to one percent to jumpstart its bid to attract investors into developing renewable energy sources.

Malacañang issued recently Executive Order 449 that allows customs authorities to impose lower duties on bioethanol products used for the National Fuel Ethanol Program of the Department of Energy DOE).

These products include undenatured ethyl alcohol of an alcoholic strength by volume of 80 percent or higher, ethyl alcohol and methylated spirits.

EO 449 modified Sec. 401 of the Tariff and Customs Code and empowered the Office of the President to increase, reduce, or remove existing rates of import duty, as well as to modify the form of duty and tariff.

The EO also stated that imported bioethanol fuel will be subjected to the most-favored-nation (MFN) rate of duty.

The DOE said the lower import duties will support government’s energy independence agenda in pursuing a program promoting the use of bioethanol as a blend for gasoline.

At the same time, since there is no major producer of bioethanol fuel, a reduction in tariff will assure the price competitiveness of ethanol-blended gasoline vis-a-vis other gasoline products.

The DOE is currently pushing for the enactment into law this year of a renewable energy bill which is part of government’s measures to cushion the public from escalating crude oil prices in the world market.

Energy Secretary Raphael M. Lotilla noted that oil prices have remained at unprecedented highs with crude oil still above $60 per barrel. He said President Arroyo is making the renewable energy bill one of the administration’s two priority legislative measures.

He said the President’s move boosts the DOE’s thrust to make renewable energy sources such as wind, hydro, geothermal, solar and biomass more competitive," noting that the recently enacted expanded value-added tax (EVAT) law provides for zero-rated VAT for renewable sources of power and fuel.

The DOE is now holding group discussions with energy stakeholders to determine issues and concerns on the proposed measure.

The bill pending at the Lower House is a substitute bill, which is a consolidation of House Bills 765, 1068, 1347, 1583, 3016 and 3017 authored by Reps. Alipio V. Badelles, Harlin C. Abayon, Rafael P. Nantes, Proceso J. Alcala, Augusto H. Baculio and Arnulfo P. Fuentebella. In the Senate, Sens. Juan Flavier, Edgardo Angara and Jinggoy Estrada have filed counterpart bills.

The measure seeks to promote the development of renewable energy sources specifically in the electricity industry by mandating all power generating companies to source a percentage of their power supply from renewable energy sources. Renewable energy sources like geothermal and hydro accounted for 18 percent and 15 percent, respectively, in the power generation mix for 2004.

The bill also aims to increase the utilization of renewable energy by providing additional fiscal and non-fiscal incentives.

Currently, several incentives are given for the development of renewable energy. These include income tax holidays and exemptions from or reduced real property tax, tax on domestic capital, and import duties.

The Philippine Export and Import Bank (PhilExim Bank) is also extending guarantees for private sector investments on renewable energy projects, the most recent of which was the Bangui wind farm in Ilocos Norte.