VietNamNet Bridge – The Ministry of Finance (MOF) plans to raise the import tariff on E5 bio-fuel sharply by seven times so as to protect domestic production and encourage sales in Vietnam.

The Binh Son Refining and Petrochemical Company has proposed raising the E5 import tariff to protect domestic production, fearing that its E5 fuel may not be able to compete with imports.

E5 bio-fuel now bears a tax rate of 5 percent; RON92 petrol has 35 percent and denatured ethanol E100 20 percent.

If enterprises import 95 percent of RON92 petrol and 5 percent of denatured E100 to make E5, the production costs would be higher than the import price of E5.

Binh Son says the current tax policy does not encourage enterprises to make E5 domestically, which would make it impossible to implement the government’s plan to popularize bio-fuel products in the domestic market.

Under the government’s Decision No 53, from 2015, E5 will be the petrol used for road vehicles nationwide.

Binh Son can put out 2 million tons of RON92 and satisfy 30 percent of the domestic demand for E5.

Some petrol importers have reportedly joined the E5 market by mixing RON92 imports with denatured E100 to make E5.

Analysts noted that Binh Son is provident when asking for tax increase, because no enterprise has imported E5 for domestic sale so far.

However, MOF has confirmed that the current import tariff on the input materials to make E5 is much higher than the import tariff on finished E5.

Meanwhile, in principle, the import tariff on materials must be lower than the import tariff on finished products so as to encourage domestic production.

An official of the ministry confirmed that the ministry is considering raising the import tariff on finished E5 from the current 5 percent to 35 percent.

MOF and relevant ministries have been asked to “save” E5.

The public has not been buying bio-fuel in the last two months, after E5 was put up for large-scale sale in the domestic market.

Meanwhile, petroleum traders have not tried to boost E5 sales. They would rather step up the sale of RON92 than E5, because the RON92 price is on a sharp decrease, while E5 prices cannot be lowered further.

The problem is that while oil and petrol prices have been falling, the price of E100, which is used to make E5, remains high. This has made it unprofitable to trade in E5.

Analysts warned that the national plan on popularizing E5 may “die young” if the government does not “give it a push”.

It is expected that Hanoi will have 42 E5 sale points, and HCM City 58.

Chi Mai