Suwit pushes for Deeper tax cuts for E85 fuel

"The Finance Ministry may be afraid it will lose income from a tax reduction for E85. But on the contrary, the country will save more than Bt100 billion in oil imports a year if we encourage consumption of E85. The multiplier effect will also circulate [this saving] and boost financial liquidity in the economy," he said.

The temporary tax break proposed by the Finance Ministry would not be attractive enough to encourage ethanol manufacturers to expand production capacity, he said.

Prime Minister Samak Sundaravej will lead upcoming negotiations on E85 tax incentives with the three ministries.

E85 gasohol is a blend of 85-per-cent ethanol and 15-per-cent petrol.

Recently, Finance Minister Surapong Suebwonglee said his ministry would propose cutting the excise tax for E85 from Bt2.50 a litre as previously planned to 50 satang, while the excise tax for E85-compatible cars was expected to be lowered from 25 per cent to 20 per cent.

Suwit said the promotion of flexible-fuel cars would not cannibalise the eco-car scheme, because they focused on different markets.

"Demand for E85-compatible cars is high only in some countries that can produce ethanol, while the eco-cars, which are focused on the environment and saving energy, are in high demand worldwide, due to rising energy prices," he said.

The Industry Ministry has granted licences for 47 ethanol plants. Only 11 have started production, while the rest are awaiting a clearer government policy on E85 gasohol.

Ethanol supply runs about 2 million litres a day, against consumption of 700,000 litres a day.