Experts and E5 petrol distributors have urged the government to take drastic measures to encourage the use of biofuels.
Making biofuels (ethanol) from sliced cassava has been pointed out as an effective solution which allows replacing the fossil energy sources which will become exhausted one day. However, to date, Vietnam still has not had a perfect legal framework to develop the biofuel production.
It is expected that by the end of 2011, at least four ethanol production factories will be put into operation which have the capacity big enough to satisfy the demand for ethanol used to make E5 petrol (5 percent ethanol). However, the risk of unpopularity of the product is foreseeable.
Until now, three years after the Prime Minister released the decision on approving the plan on developing biofuels until 2015; the policies on relating issues, such as the production, storage, distribution and use of biofuels are still under compilation.
Ministries and branches have suggested applying the policies on giving preferences to ethanol producers. However, there has been no policy on the trade, making up and distribution of biofuels, though this is considered the decisive factor which can bring biofuels into use in a large scale.
Meanwhile, in an effort to prepare for the opportunities, which are believed to come in the future, a lot of enterprises have been developing the projects on making biofuels from domestic sliced cassava.
Two factories of Dong Xanh Company in Dai Loc of Quang Nam province have become operational which have the capacity of 130 million liters a year, while the factory of Tung Lam Company in Dong Nai province has the capacity of 70 million liters. Especially, the Vietnam Oil and Gas Group PetroVietnam has kicked off the construction of three ethanol factories in Phu Tho, Dung Quat and Binh Phuoc, each of which has the capacity of 100 million litres a year.
Two factories in Phu Tho and Quang Ngai provinces will become operational by the end of the year. The factories all have signed contracts with suppliers on collecting cassava, while they are considering developing material growing areas of their own.
Will E5 be compulsory fuel in Vietnam?
PV Oil, one of the few E5 bio-petrol, has proposed the government to make the decision to use E5 as the compulsory fuel nationwide. In order to encourage enterprises to make biofuels and ensure the outlet for the producers, PV Oil has also proposed to apply tax incentives to the producers. For example, it has proposed the 50 percent luxury tax reduction in the first phase of operation.
The proposal has been supported by many experts. Dr Phan Dang Tuat, Director of the Industry Policy and Strategy Research Institute said that it is now the golden opportunity to bring E5 into use in a large scale. This should also be seen as a chance to encourage the use of other biofuels, such as E10, which allows easing of the environmental pollution, saving energy.
At present, the petrol price is above 20,000 dong per liter, therefore, it would be acceptable to make E5 with five percent of ethanol. According to Tuat, this is now the “golden opportunity” because the production cost of biofuels is always equal or higher than normal petrol, while depending on the input materials collected from farmers. Meanwhile, in order to encourage the use of biofuels, the price of E5 should be lower or equal to the price of normal petrol.
Tuat stressed that if the government does not offer preferences to manufacturers and does not set up a roadmap for biofuel use nationwide, it will be difficult for biofuels to find buyers.
