China biofuels firms to benefit from new subsidies

04 December 2006 08:30  [Source: ICIS news]

SINGAPORE (ICIS news)--Chinese biofuel producers are expected to benefit from the government’s new policies and subsidies, a consultant and biofuels producers said on Monday.

The country’s top economic planner, National Development and Reform Commission (NDRC), issued new policies and subsidies to encourage the development of bioenergy and biochemical industries, the Xinhua News Agency reported on Friday.

Biofuel companies would benefit from these subsidies, which were in addition to existing ones for ethanol producers, a Beijing-based consultant from China International Chemical Consulting Corp said.

The consultant said the Chinese government was also likely to continue ethanol subsidies, which offsets production costs by around Yuan (CNY) 1000/tonne ($128.2/tonne).

Producers welcomed the subsidies, but one biodiesel producer said it has yet to start looking at available subsidies as the business was still profitable.

The country’s new measures included getting companies to set up risk reserves to offset low crude oil prices; subsidies and tax breaks for raw material production and for projects to develop new technologies, it said.

If crude oil prices were at a low for a long period, the government would provide subsidies to offset some losses, it added.

The new policies were jointly issued by the NDRC, the ministries of finance and agriculture, the State Administration of Taxation, the State Forestry Administration.
ICIS news previously reported that the profitability of Chinese biofuel projects could be affected when crude oil prices fall below $40/bbl.

NDRC officials declined to elaborate on the details of the package.

The country produced 1.02m tonnes of bioethanol in 2005, Xinhua said, adding that the government estimated that by 2010, ethanol-mix petrol will account for half of China's petrol consumption.

($1=CNY7.8)

By: Florence Tan
+65 6780 4359

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