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By the year 2014, the government proposed to introduce a zero rate of excise duty on bioethanol used for the production of biofuels. Ukrspirt is confident that the preferential tax treatment will allow the concern to launch all production facilities and provide the market with a biocomponent. But market participants do not promise increased demand for bioethanol.

Yesterday the Ministry of Finance announced a bill under which it is proposed to introduce a zero rate of excise duty on bioethanol used for the production of biofuels up to January 1, 2014. Manufacturers of bioethanol will issue a bank avalized tax anticipation bill for the amount of excise duty. The rate of duty will be determined as the difference between the full rate for ethyl alcohol (21.5 UAH/l) and zero rate per 1 liter of dehydrated alcohol. In the case of using spirits for purposes other that intended, the excise duty will be charged to the state budget at the full rate. The spirits distilleries which will produce bioethanol will be prohibited to produce ethyl alcohol and store bioethanol non-denatured by gasoline (1%) at warehouses.

According to the state concern Ukrspirt, within the program of alcohol industry development program for 2007-2013, Techinservice has invested 200 mln UAH in the reconstruction of spirits distilleries for the production of bioethanol with a capacity of 150-200 ths. tons per year.

Vitalii Sosnitskii, Deputy Chairman of the state concern Ukrspirt says that according to the law 3502-IV, the excise duty on bioethanol, which is used only for the production of gasoline additives and engine mixtures, was abolished: "They contain no more than 6% of bioethanol and bioethanol content reaches up to 85% in biofuel. The new preferential tax regime will allow the concern to load the facilities and produce bioethanol, which both farmers and gasoline producers can buy from us to produce biofuels."

According to Kommersant, it is necessary to settle the pricing policy in Ukrspirt to create a sales market for bioethanol. "To produce a liter of spirit, it is necessary to invest 6 UAH, and the excise duty is 21.5 UAH. In addition, the wholesale price of gasoline is much lower than spirits, so it is necessary to create additional incentives to interest the fuel producers to buy dehydrated spirits," he said. "Unfortunately, just stimulation through taxation does little. We have been asking for a long time to adopt a law which would oblige to use bioethanol in the production of mixed gasolines," Eldar Selimov, Head of Press of Ukrspirt, said.

The market players were not glad about the initiative of the Ministry of Finance. Ukrtatnafta refused to comment on the bill. "We never comment on government decisions and regulatory documents," Sergei Bilenkii, Head of Public Relations at Ukrtatnafta, said. "We have not discussed the possibility of using bioethanol yet, and so far we don't need it," Valerii Riasik, Head of Press of LUKOIL-Ukraine, said. And experts rated the proposal ambiguously. "This is quite an effective measure. Distributors and manufacturers of regular fuels have been waiting for tax incentives. Then there is a chance that bioethanol will become interesting for them," Vitalii Dovii, Director of Fuel Alternative, said. "Now it is more challenging to produce bioethanol by farmers for farmers." Fuel producers may face the problem that the consumer is not ready to fuel the vehicle with a new fuel and it will not be in increased demand. Meanwhile, we cannot produce high-quality biofuels which meet European standards, so, it will be difficult to create a sales market," Gennadii Riabtsev, Deputy Director of Research and Development Center Psikheia, said.

Source: http://www.kommersant.ua/