DTI mulls 20% ethanol tariff

MANILA, Philippines - The government is looking at doubling the tariff on ethanol in order to prevent the closure of local plants and in effect prevent the death of the industry.

“If we keep the tariff at 10 percent we won’t be able to compete. We should make it 20 percent,” Trade Undersecretary Cristino L. Panlilio told reporters.

The undersecretary, who is also the managing head of the Board of Investments (BOI), said the government must do its part in helping encourage investments in bioethanol plants. If imported ethanol is cheaper than locally-produced ones because of the low tariff then manufacturers will opt to buy the imported product from Brazil and Thailand rather than manufacture it locally.

If this happens, not only will the country be dependent on imported ethanol which is sensitive to fluctuations in the foreign exchange, the local sugar industry may also suffer. Ethanol is a product of sugarcane.

The Ethanol Producers Association of the Philippines (EPAP) has called for the tariff increase, warning that they may close shop given that ethanol from Brazil and Thailand are cheaper. EPAP head Jose Ma. Zabaleta said the ideal tariff for imported ethanol is about 30 percent. However, EPAP is only asking the government to raise it to 20 percent.

Earlier, Ramon Carandang, head of the Presidential Communications Development and Strategic Planning Office, said the government is not rejecting outright the recommended tariff hike. He said they have to consider the impact of higher tariff and import duties on the importers, the local companies, the public, and even the pump prices.

While oil companies warned that increasing the tariff may also jack up pump prices, Carandang said they also have to consider the survival of the local manufacturers. Another factor is the ability of local manufacturers to produce and supply all the ethanol needs of the country.

“We’ve got to weigh that (manufacturers’ threat to close down) but we also need to weigh the interests of the consumers. Again, we want to encourage that but we need to make sure that that is all done without the consumers being burdened by high prices. I think the energy department is in the process of coming up with some kind of plan to address this,” he said.