Thailand drops taxes on ethanol fuel, ethanol-using cars

The Earth Times - 03 Jun 2008

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Bangkok - In a bid to curb oil imports and rising inflation the Thai cabinet on Tuesday approved tax cuts on E85 (a bio-fuel mix of 85 per cent ethanol and 15 per cent petrol) and E85-using car models. Energy Minister Poonpirom Liptapanlop said the cabinet had approved his proposal to cut the excise tax on E85 from 3.65 baht (11 cents) per litre to 2.75 baht (9 cents), to encourage local ethanol producers and refineries to produce more of the bio-fuel.

Ethanol in Thailand is made from sugarcane or tapioca.

The cabinet also reduced the excise tax between 25 to 35 per cent on imported CBU (completely built up) vehicles using E85-compatible engines, depending on their engine size.

"Now European and US car makers are ready to export E85 models to Thailand within the next three to five month," Poompirom told reporters.

General Motors, Ford and Volvo have all expressed an interest in supplying E85 models for the Thai market.

The energy minister said he would meet with refineries, petrol station owners and car manufacturers later this week to promote the use of E85 within the next few months to assure motorists that the bio-fuel will be available, starting out with 30 to 50 petrol station outlets.

The ethanol push comes at a time when Thailand is facing a widening trade deficit and rising inflation because of rising oil prices on the international market. Inflation jumped 7.6 per cent in May, year-on-year, hitting a 10-year high.

While the current government's excise tax cuts on imported E85-compatible vehicles may be welcome by some manufacturers, the move may adversely affect Thailand's programme (pushed by the previous government) to turn the kingdom into a hub for the production of small, fuel-efficient eco-cars.

Six car manufacturers, including Toyota, Nissan, Mitsubishi, Honda, Suzuki and Tata have all won promotional privileges to invest 536 million dollars to produce more than 300,000 eco-cars for the domestic and export markets over the next five years.

Under the programme, companies have to manufacture no fewer than 100,000 units per annum from the fifth year and meet the government requirements of producing a vehicle that consumes less that 5 litres of petrol per 100 kilometres and complies with the Euro 4 standards of carbon emissions of less than 120 grams per kilometre.

Under the military-installed government of last year, Finance Minister Chalongpob Sussankarn finally agreed to slash excise taxes on eco-cars to 17 per cent, effective October 2009, giving the future eco-cars a price advantage.

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