Press Release
May 22, 2006


Senate Minority Leader Aquilino Nene Q. Pimentel, Jr. (PDP-Laban) today urged Malacañang and finance authorities to fully support the tax and other incentives that the Senate is proposing for the commercial production of ethanol, coco-diesel and other bio-fuels to hasten the development of alternative fuel sources and make their prices affordable to the ordinary motorists.

Pimentel said that tax exemptions and financial assistance will apply primarily to the importation of machinery and equipment to be used in manufacturing the bio-fuels and the utilization of farm lands for sugarcane plantations.

He noted that while an increasing number of players in the sugar industry and other entrepreneurs are interested in investing in the ethanol production program, they are banking on government support in terms of tax break and concessional credit facility to transform their plans into reality.

Since ethanol and coco-diesel production needs huge capital, the grant of state incentives is a must to fast track the construction of bio-fuels plants and to encourage the entry of more investors. The availment of these incentives is a key component in the countrys efforts to expand the sources and use of indigenous and renewable energy sources, the minority leader said.

Under the Senate version of the Bio-Fuels Act (Senate Bill 2226), the importation of machinery and equipment to be used exclusively for the production of bio-fuels shall be exempt from import duties for a period of five years from the date the companies concerned are accredited by the Department of Energy.

Likewise, bio-fuels shall have a zero specific tax.

Other incentives for bio-fuels granted for under the bill are:

All investments in the production, blending and distribution of bio-fuels and adoption of biofuel-complaint vehicle technologies shall enjoy the applicable fiscal and non-fiscal incentives as may be provided for under the Omnibus Investment Code.

Government financial institutions, such as the Development Bank of the Philippines, Land Bank of the Philippines, Quedancor and similar other government institutions shall accord high priority to extend financing to entities that shall engage in activities involving the production, storage, handling and transport of bio-fuel and bio-fuel feedstock, including the blending of bio-fuels with petroleum.

Pimentel, one of the principal authors of Senate Bill 2226, said that the bill requires that within two years from the effectivity of this legislation, a minimum of 5 percent bioethanol fuel by volume shall be blended into all gasoline fuel distributed and sold in the country.

The bill also mandates a 10 percent blend of bioethanol for gas sold at pump stations within 4 years of effectivity of this legislation.

Pimentel said studies of energy experts that at a 10 percent mandated ethanol blend, the Philippines can reduce its gasoline importation by as much as 400 million liters annually, that will translate into a $100 million savings in foreign exchange yearly or $1 billion in 10 years.

To illustrate the capital requirements for bio-fuels production, he pointed out that an ethanol distillery now being built in San Carlos, Negros Occidental called the San Carlos Bio-Energy Plant, will cost about P1.5 billion.

Pimentel said the abundant supply of sugarcane and the plan to open up large tracts of idle lands for additional sugar plantations make ethanol production in the country a very viable industry.

Environmentally speaking, he said ethanol consumption by automobiles can significantly reduce carbon dioxide emissions that will improve the quality of air. At the same time, by reducing the use of fossil fuel, ethanol reduces new greenhouse gases which cause depletion of the ozone layer that leads global warming.

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