Philippines bioethanol producers hoping for feedstock based pricing formula

Reynaldo P. Bantug, president of Green Futures Innovation, is hoping along with domestic fuel bioethanol producers in the Philippines that the Department of Energy (DOE) will set a feedstock-based pricing formula and higher import tariffs. Bantug said that if a pricing formula is set, it could help domestic producers to compete on a level playing field. “Right now there is little governance or guidance on ethanol pricing,” said Bantug. “We get some pricing data from the central bank and customs declared prices. But we are waiting for the circular to clearly define how the local ethanol production will be used. The Department of Energy is expected to publish a circular which will define rules of consumption and blending for ethanol. A proposal has been made to the DOE by local producers using a feedstock-based formula for molasses, which is the most representative feedstock in the country.” According to Bantug, inherent price distortions in the country’s bioethanol industry, such as very high sugar prices, can cause price distortions on ethanol. The problem is that sugar competes with ethanol for feedstock and high sugar prices have caused ethanol feedstock including sugarcane, molasses and cassava, to be diverted for sugar production. Because of the diversion of sugar feedstock, the Philippines have to import all of its ethanol requirements. This is in direct opposition to the 2006 Biofuels Act which stated that the country was to achieve self-sufficiency and reduce the country’s dependence on energy imports. At the current time, sugar is trading at 40-50% above bioethanol partially in response to the disparity in import tariffs. In the Philippines, importers of sugar must pay a duty of 38% while importers of ethanol pay only 1%. Therefore, sugar easily trades at higher prices than ethanol, when it is economically unviable to produce ethanol. At the current time the DOE mandates all ethanol for the use of gasoline blending, but it does not regulate feedstock. (February 21, 2011)