call for ethanol excise..

http://www.abc.net.au/pm/content/2006/s1655718.htm

Call for ethanol excise until 2018
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PM - Monday, 5 June , 2006 18:17:28
Reporter: Alexandra Kirk
MARK COLVIN: There was another cause for friction between the Federal Coalition partners today, and the issue was ethanol.

Last week the Nationals seemed happy about a Federal Government change of heart that softened the way fuel rebates are claimed.

But now they've twigged to changes in the excise on alternative fuels like ethanol.

They say it'll ground the domestic ethanol industry before it's really had a chance to get off the ground.

Nationals Senator Barnaby Joyce wants Australian-produced ethanol's current protection from foreign competition to run till 2018.

From Canberra, Alexandra Kirk reports.

ALEXANDRA KIRK: The Nationals have been trying all manner of ways to promote a local ethanol industry.

When the sugar sector was in the doldrums ethanol was seen as one-way to bolster the income of struggling cane farmers, as well grain growers.

And in 2002, with the prospect of a shipment of ethanol being imported from Brazil, the Government announced a subsidy for locally produced ethanol, which effectively wiped out the fuel excise, thereby removing any financial incentive to import the biofuel.

Due to end in 2008, the Nationals convinced the Government to extend the deadline to 2011.

Now the Government's mammoth fuel legislation, before Parliament, has spelled out all fuel tax regimes to 2015.

The Nationals have read the fine print and are worried the deal for ethanol could soon come unstuck. They say the new excise timetable seems to contradict the Government's pro-ethanol rhetoric.

At issue is the stipulation that from 2011, imported ethanol will have the same effective excise rate as domestically produced ethanol.

BARNABY JOYCE: If it's true and it happens like this, it'll be the end of the domestic ethanol industry, not the start of it. And Australia has an immense potential to be a great benefactor in the bio-renewable fuel industry at the 21 Century.

ALEXANDRA KIRK: Nationals Senator Barnaby Joyce doesn't think that's enough time for Australia's fledgling local ethanol industry to be up and running and competitive.

BARNABY JOYCE: No, because the… no, because the oil companies have been dragging their feet on getting ethanol out into the community. They've been dragging their feet for the last six years. So they know full well that if this is the scenario in 2012 that it's a fait accompli, ethanol will collapse.

If this is correct there will be a reduction in the price of the excise of imported ethanol, which means, sure, you'll be using ethanol, but you'll be using Brazilian ethanol.

ALEXANDRA KIRK: Nationals Senate leader Ron Boswell isn't commenting, but PM understands he too is concerned and trying to convince the Government to reconsider.

As a result of information garnered from a Senate hearing today, Barnaby Joyce is warning the Government not to proceed with this excise change. Rather than raise the prospect of crossing the floor and voting against this legislation, he says he'll try to get the Government to back down.

He says the current higher excise on imported ethanol should continue.

BARNABY JOYCE: Sixty-three per cent of our trade account deficit, which is front and centre of economic argument at the moment, is attributable to the importation of fuel.

Let us create an industry in Australia that actually deals with that problem.

ALEXANDRA KIRK: So, by when do you think the ethanol industry will be up and running, on its own two feet, so that it will be able to compete and you won't need differential excise rates?

BARNABY JOYCE: Ah well, it's a case of when the oil companies start wanting to play ball. They're not playing ball at the moment. They have no intentions of trying to take on board a product that they don't produce as an alternative to a product that they own.

ALEXANDRA KIRK: But Industry Minister Ian Macfarlane says neither he nor the industry agree with Senator Joyce's dire predictions.

IAN MACFARLANE: I think what we've got to realise is that the ethanol industry has had 10 years of excise free and 10 years of a differential imported ethanol, and that's something that they've understood right from the start.

I can only go on what people are saying to me, and they're saying that they need to be internationally competitive by 2010 and they expect to be able to do so.

ALEXANDRA KIRK: Mr Macfarlane says the ethanol industry's progressing well, consumption is well up, arguing excise is not an issue for the big players such as CSR.

IAN MACFARLANE: We're not considering a further accommodation. In terms of where the ethanol industry is going, we're seeing a 50 per cent uptake in motorists using ethanol. We're seeing confidence from the investors that the industry has a strong future.

And, really, what we should be doing is getting out there and selling ethanol as an alternative to motorists as part of an environmental and sustainability push.

ALEXANDRA KIRK: Some in the Government point out the differing excise rates are an issue because they're not World Trade Organisation compatible.

IAN MACFARLANE: Well, world trade issues are one consideration. And the longer we have this significant differential, which is 38.5 cents effectively, then the greater risk we take of having some intervention.

But the aim of the exercise is to progress the industry towards sustainability and to increase consumption of ethanol to 200 megalitres per annum.

Now that is progressing. Everyone wants to see it progress faster. The industry is working together. That is showing real signs of happening.

ALEXANDRA KIRK: Barnaby Joyce isn't giving up.

BARNABY JOYCE: I think that we should take into account that the oil companies have been dragging their feet for the last six years, so let's move the deadline out for another six years.

ALEXANDRA KIRK: So that's 2018?

BARNABY JOYCE: I think that would be a fair statement.

MARK COLVIN: Nationals Senator Barnaby Joyce, ending that report from Alexandra Kirk.