The Ministry of Industry and Trade has proposed tax adjustments to lower E10 gasoline prices and make biofuel more attractive than mineral gasoline, Thanh Nien has reported.
A draft resolution proposes that the Ministry of Finance study changes to the special consumption tax and environmental protection tax rates for E5 and E10 gasoline products.
The ministry said the current price gap was only small, with E10 priced at VND 23,450 (US$0.89) per litre compared to RON95 gasoline at VND 24,078 (US$0.91).
This is an interesting proposal in that, from June 1 this year, all unleaded petrol is mandated to contain at least 10 percent biofuel (though, confusingly, a 5 percent blend will also be sold), which would make pricing biofuels lower than regular fuels to drive uptake redundant.
However, the fact that the MoIT is looking to tax breaks anyway might suggest doubts about the 10 percent mandatory component actually being implemented.
This would fit with doubts about the policy more broadly.
For example, as more drivers convert to the new fuel demand for inputs, that is organic material, which is generally manioc (cassava) in Vietnam, will likely become more expensive. This could end up pushing up the cost of these fuels.
Vietnam also only produces about 40 percent of the biofuel it will need, so import sources will need to be secured as well. Given the current fuel supply challenges from the de facto closure of the Strait of Hormuz, this might be difficult to do.
Policies similar to this have also been on-again, off-again for just over a decade. This has seen producers build out facilities only for them to go to ruin as policies to force the switch to biofuels have been abandoned.
Of course, this time around, price and supply challenges from the conflict in the Middle East may be impetus enough to see the policy follow through.