Castor caught in Brazil biodiesel crossfire

27 April 2007 00:47  [Source: ICIS news]

SAO PAULO (ICIS news)--Brazil’s humble oilseed, castor, is caught in a regulatory crossfire over a tax incentive aimed at subidising biodiesel production, sources said on Thursday.

Top government biodiesel programme official Arnaldo Campos said there is an investigation underway to determine if the incentive is in fact subsidising other uses of castor such as industrial and chemical uses, after public controversy grew over the implementation of the subsidy.

“We have been checking export and sales registries and have not found anything that proves that castor oil producers are selling the product to other industries,” said Campos in Portuguese.

The government’ biodiesel plan offers tax exemptions to those who buy castor oil from small producers for the production of biodiesel. One estimate is that the incentives have drawn some Reais (R) 240m ($118m) in new investment.

Local press has reported allegations that mills in the northeast region of Brazil where the subsidy is offered later resell castor oil, which can cost nearly twice as much as biodiesel according to some analysts, and use cheaper soy oil as feedstock.

“If that is true, we will be able to prove it following the first big castor grain harvest, to take place between July and September this year,” Campos said.

A Brasil Ecodiesel official admitted the company did sell a part of the castor oil produced to industries other than biodiesel due to “logistical issues,” without offering details.  

“Those were very small sales,” said Castro. “And it is not illegal to sell castor oil to other industries other than biodiesel as long as the feedstock is bought from small rural families,” he added.

If not illegal, the use of the castor subsidy for other industries has irked soybean farmers, who do not benefit from the same incentives, and castor producers in other regions who claim the northeastern farmers are unfairly privileged.

According to analysts’ reports, it would be necessary to increase the demand for castor oil about five times for it to become viable for the production of biodiesel.

Brazil’s production capacity of biodiesel is forecasted to reach some 1.3bn litres/year by July 2007, according to Castro.

Current production capacity is estimated around 800m litres/year.

Some 59% of that would be produced with soy oil as feedstock, 20% would use castor oil, while the other 21% would come from other sources, according to the Agrarian Development Ministry.

($1.00 = R 2.03)

By: Hellen Berger
+1 713 525 2653

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