Vietnam fuel giant asks for tax support to keep unpopular biofuel in business

By VnExpress   September 21, 2016 | 10:48 am GMT+7
Vietnam fuel giant asks for tax support to keep unpopular biofuel in business
The new biofuel E5 has been poorly promoted in Vietnam. Photo by Kim Anh/VnExpress

The government continues to miss its targets for the cleaner, cassava-based fuel.

State-owned fuel giant PetroVietnam has asked the government for tax support to save its new biofuel business from going bankrupt due to poor consumption.

PetroVietnam said in a statement that it needs exemptions for tariffs on imported equipment, environment and luxury taxes for the cassava-based fuel, as well as reductions to VAT so that it can lower prices to encourage demand.

The company said that while the 5-percent ethanol blended E5 is a new product, high input costs have made it uncompetitive and stopped it from catching on.

PetroVietnam started investing in ethanol factories in 2008 when cassava cost around VND2,000 a kilo, but the price has been surging since then, sometimes by 2.5 times, while oil prices have been in free-fall over that period.

E5 now sells at VND16,290 ($0.73) a liter, cheaper than its fossil fuel counterpart 92-RON, the country’s most popular gasoline grade, by a mere 1.6 percent.

According to a government initiative, the biofuel, which is said to reduce toxic gas emissions, would be available across the country by the end of 2015.

When this target was missed by some way, the government instructed the cities of Can Tho, Da Nang, Hai Phong, Hanoi and Ho Chi Minh City along with three provinces to switch entirely from 92-RON to E5 from June 2016.

But again nothing happened. While the government has failed to set an attractive price, many gas stations said they are not willing to promote the new fuel or invest in new pumps suitable for E5 since they are afraid of making losses.

This led to the closure of three ethanol factories that were designed to provide more than eight million tons of E5 or more than 90 percent of national gasoline demand.

Japanese corporation Itochu has withdrawn from the first factory in the southern province of Binh Phuoc and transferred its entire 49 percent stake to Thailand’s Toyo, which plans to reopen the factory no sooner than 2018, and only if the market bounces back.

The other factories in the central province of Quang Ngai and Phu Tho have been closed for months.

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