Government mulls tariff hike on imported ethanol

MANILA, Philippines - The Aquino administration is preparing to issue an Executive Order (EO) that would raise the tariff on imported ethanol to 20 percent to help support the local industry as higher tariffs would provide them enough cushion from cheap imports.

A Finance source said the policy-making Cabinet-level Committee on Tariff and Related Matters has recommended the issuance of an EO implementing the higher tariffs.

The issuance of an EO may be done when Congress goes on recess during the Christmas break.

The Finance official said raising the tariffs on oil would also encourage local production.

“It will provide a signal to investors in ethanol production that the government is supportive of such initiatives,” the Finance official said.

Earlier, Trade and Industry officials have said that the agency is supporting moves to raise the current 10 percent tariff on fuel ethanol to 20 percent to encourage local investors and to help ensure the country’s energy supply.

The Trade department chairs the Tariff and Related Matters technical committee, which prepares the government position on tariff rate issues.

Local industry players led by the Ethanol Producers Association of the Philippines (EPAP) said during a hearing earlier conducted by the Tariff Commission that the government should raise ethanol tariff to 20 percent, saying this would help the local industry.

The landmark Biofuels Law of 2006 mandates oil companies to mix five percent ethanol in their gasoline products starting this year and increase this to 10 percent by next year.

According to government estimates, the country would need 208.11 million liters of ethanol this year for a five-percent minimum blend and 460.63 million liters in 2011 for a 10-percent blend.

This requirement would need an increase in ethanol production in the next few years.

As such, EPAP said the intent of the law is to develop the local industry by 2011. It said that a 20 percent tariff protection would go a long way.

On the fiscal point of view, a Finance official said it would also mean additional revenues for the government, which would boost state coffers.