Direct Ethanol Sales From Plants Approved by Senate and Promises to Boost Competition and Curb Gasoline Price Increase at Fuel Stations

Ethanol Sales by Mills Directly to Gas Stations May Become the Solution to Contain and Curb the Rise in Gasoline Prices

The Senate approved, last Wednesday (12/8), by 71 votes in favor and none against, the permission for the direct sale of ethanol from the mills – without passing through distributors, to gas stations. Now, Provisional Measure 1.063/2021 goes to the sanction of President Jair Bolsonaro (PL). The new MP may curb the rise in gasoline and diesel prices, and ease the burden on Brazilians.

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Currently, ethanol taxation is done in two stages: part at production, another at distribution. The text expected to be edited by the government, still in May, should both equate the tax viability of direct sales and put it into legislation, avoiding that the issue can be treated again through a resolution of the National Agency of Petroleum, Natural Gas and Biofuels (ANP), with more volatile effects than in a law.

Pros and Cons; Questions and Speculations About the Direct Sale of Ethanol

Many questions and speculations regarding the consequences and benefits of the direct sale of ethanol are still ongoing.

The MP changed the PIS/Cofins collection system. If the importer acts as a distributor, or if the retail reseller makes the importation, they will have to pay the PIS/Cofins rates owed by the producer/importer and by the distributor.

As for anhydrous ethanol, the exemption from these taxes for the distributor ends, and they will now pay 1.5% PIS and 6.9% Cofins. The decision mainly affects imported products.

For the National Agency of Petroleum and Gas and Biofuel (ANP), a “linked distributor” should be created, that is, a distributor controlled by the mills, with simplified requirements, but authorized only to sell hydrated ethanol from the linked mills.

The Legal Fuel Institute (ICL), which works to combat the irregular market, argues that the solution lies in tax simplification, which would allow for a single-phase collection, with the tax being collected at the source, in the form of “ad rem” tax (R$/liter) and with a single rate among states, thus avoiding tax asymmetry and loss of control in inspection.

With the direct sale from mills to gas stations, the government proposes to make the tax incidence single-phase for producers only in these cases, so that there is no loss of tax revenue. For other fuels, such as gasoline and diesel, federal taxation is already single-phase and applies at refineries.

Direct Sale from Mills Will Stimulate Competition with Gasoline

It is not yet possible to know exactly how much the direct sale of ethanol would impact the price of the biofuel in Brazil, as there is a lot of dependence on industrial logistics in each state. However, a study by Esalq-Log in 2019 showed that the average cost of transporting ethanol in São Paulo State would drop by about 30% with direct sales.

There are also estimates that the concentration of production and distribution margins on the producer and increased competition between mills and distributors in fuel supply in the market could reduce hydrated ethanol prices for the final consumer by up to 20 cents per liter.

“The great gain is the appreciation of renewable fuel. It will be more competitive against fossil fuel, gasoline, and will be more appealing for consumers to refuel,” points out Sévero.

After Loyalty to Brand at Gas Stations Being Released, ANP Also Authorized the Sale of Gasoline and Ethanol via Delivery Yesterday

After the direct sale of ethanol and the end of brand loyalty at gas stations being approved on August 11, which allows gas stations that display a specific distributor’s brand to sell fuels from other suppliers, as long as the consumer is informed, it is now time for the long-promised sale of gasoline and ethanol via delivery to be approved by the National Agency of Biofuels, ANP. Together, these measures may become the ‘solution’ to contain and curb the rise in gasoline prices, and ease the burden on consumers.

With this, gas stations will be able to deliver regular gasoline or ethanol to homes. The measure, however, comes into effect 180 days after the resolution is published in the Official Gazette. Read the full article here.

Raízen, a Shell Group Company, Plans to Build Three Ethanol Production Plants from Bagasse and Sugarcane Straw

Raízen, the global giant in ethanol production, in conjunction with Shell, intends to build three more cellulose ethanol plants — or second-generation ethanol. This good news was announced by entrepreneur Rubens Ometto of Cosan on 03/15.

The technology for producing cellulose ethanol emerged from a partnership between Shell and the Canadian logen, specialized in biotechnology. In the last harvest (2019/20), the Piracicaba unit produced 226 liters of ethanol for each ton of dry biomass.