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Suwit: Ethanol Reforms Due

July 15, 2008

By Vichaya Pitsuwan, Bangkok Post, Thailand

Jul. 12–The Industry Ministry has vowed to push for tax and legal reforms to help ease an ethanol oversupply and to support technology development for the industry.

While the private sector is developing ethanol rapidly in terms of quality and supply, government policies are not yet persuasive enough to promote ethanol demand, Industry Minister Suwit Khunkitti acknowledged yesterday.

Ethanol producers for the past three years have been lobbying for tax reforms and new regulations for ethanol production intended for vehicle fuel. Currently, ethanol is included in the same category as alcohol used in making liquor.

Eased rules and lower taxation, they say, would allow them to export surplus ethanol at a competitive cost to countries where demand is on the rise.

Mr Suwit made the comments at the launch of the world’s first commercial-scale plant making ethanol from bagasse or cellulose. The pilot project involves collaboration between the New Energy and Industrial Technology Development Organization (NEDO) of Japan and Thai Rung Ruang group.

Mr Suwit said the successful promotion of E85, a blend of 85 percent ethanol and 15 percent petrol, could not happen without liberalisation of the ethanol industry.

“I will push for lower excise tax on ethanol-mixed fuel and I hope that once the tax on E85 fuel is attractive enough for fuel users, demand for E85 vehicles will automatically be generated, absorbing excess supply of ethanol,” he said.

The Energy and Finance ministries have proposed a 20 percent import tax on E85 vehicles as carmakers complained that the 25 percent tariff was still too high.

Ugrit Asadathorn, the managing director of Thai Rung Ruang Energy, cautioned that improved ethanol production technology would lift output and add to the local surplus unless the government changed taxes and regulations.

“That is why there are only 11 functioning ethanol plants in Thailand, out of 47 operators who have received ethanol production licences,” he said.

He said the price of ethanol was also controlled by oil refineries and licensed traders as ethanol producers were legally obliged to sell their ethanol for fuel use solely to this group of operators.

“This legal requirement controls the ethanol price structure, so with little demand and an unattractive price, the ethanol industry is not growing to suit the country’s potential,” Mr Ugrit said.

Thailand is the world’s second largest sugar producer with plenty of molasses and farm waste that can be used as feedstocks for ethanol production.

The Thai Rung Ruang pilot plant uses molasses and bagasse to produce 120,000 litres of ethanol daily. The company plans to invest another one billion baht in expansion to produce 400,000 litres of ethanol daily if market demand improves.

Thailand has the capacity to produce two million litres of ethanol daily but current output is only 1.5 million litres, with 700,000 litres used locally.

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