More E85 Tax Incentives Likely

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More E85 tax incentives likely

WICHIT CHANTANUSORNSIRI & SANTAN SANTIVIMOLNAT

Excise taxes for imported E85-powered cars and equipment could be cut further to help encourage motorists to use of the new fuel, says Pichai Naripthaphan, a deputy finance minister.

The government plans to introduce E85, a blend of 85% ethanol and petrol, in the market by the end of the year, complementing E20 and E10 gasohol now available in the market. Pump prices for E85 are expected to be 10 baht per litre cheaper than premium petrol thanks to lower tax rates to encourage motorists to switch to the new fuel.

But domestic automakers have been wary of committing to the new fuel, which has yet to be adopted elsewhere in the region.

Mr Pichai told Excise Department officials yesterday that tax rates should be reviewed across the board for the auto industry to support the development and consumer adoption of new alternative fuels.

''Whether it is E85, hybrid electric technology, hydrogen fuel cells or ethanol, we need to encourage adoption to reduce Thailand's dependence on fossil fuels,'' he said.

The use of ethanol produced from locally grown sugar cane or tapioca would significantly help reduce the country's imported oil bill while also supporting local farmers.

Mr Pichai said ethanol blends such as E85 could ultimately be the country's main fuel for passenger vehicles, while natural gas promoted under the NGV programme was used for commercial trucks and public bus fleets.

''Brazil took up to 10 years before E85 and E100 became widely popular. They did it by cutting the E85 tax by half,'' he noted.

Excise tax rates for E20- and E85- compatible cars currently range from 25% to 50%, depending on engine size, or 5% cheaper than standard diesel or petrol-powered passenger cars.

Tax rates for hybrid vehicles, electric cars and fuel cell-powered cars are set at 10%, while taxes for the eco-car programme, a new category of small-sized, low-emission vehicles, are fixed at 17%.

Mr Pichai played down concerns that further tax cuts for E85 vehicles would undermine efforts to develop the eco-car segment. Local manufacturers, including most Japanese carmakers, have already pledged to invest tens of billions of baht in retooling their production lines to support the eco-car programme.

''We see eco-cars as a new fuel-efficient class of vehicle that can be sold worldwide. E85-powered vehicles meanwhile are more suited to countries that can support energy crops,'' he said.

But auto industry executives expressed frustration over the frequent changes in Thailand's industrial and energy development plans.

Any tax changes for E85 would directly undermine the eco-car programme by reducing price advantages for the small cars, one executive said.

Another executive said that while more than 120,000 E20-compatible cars were now on the roads, the fuel itself was still in scarce supply. Only PTT Plc and Bangchak Petroleum now offer E20 fuel.

''What the government should do is expand the number of E20 stations to help motorists gain wider access to the fuel,'' he said.

''Frankly, the policies for alternative energy are quite confusing. Consumers don't know what they should buy, E20 or wait for E85.''

Meanwhile, Mr Pichai confirmed reports that the government could reduce tax incentives on gasohol if global oil prices continue to slide.

Under the 46-billion-baht, six-point anti-inflation programme announced last month, excise taxes for gasohol were cut to 0.0165 baht per litre from 3.3165 and diesel to 0.0048 baht a litre from 2.19 baht. Authorities estimate these cuts, which last until January, will cost the government 33 billion baht overall.

But oil prices have fallen sharply over the several weeks, from nearly $150 per barrel in mid-July to around $115 now.

''If oil prices continue to fall, and drop below say $100 per barrel, we could scrap the excise tax reductions before the overall programme ends in January,'' Mr Pichai said.

He said the tax rates would likely be raised gradually to minimise the impact on pump prices and consumers. ''I am a believer in the free economy. We should allow prices to reflect actual costs. This would benefit the overall economy,'' he added.

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ERGO they get to buy more ethanol from abroad & more fat cats get rich importing it.

Brazil is a unique situation which can not be replicated all over the world. Ethanol (government mandated) in the US is widely blamed for food price inflation.