Brazil is evaluating a possible tax cut on ethanol production to encourage less gasoline imports by state-run oil and gas producer Petroleo Brasileiro SA (PBR, PETR4.BR), or Petrobras, Folha de S. Paulo newspaper reported in its Tuesday edition.
Currently, the gasoline sold in Brazil comes with a 20% ethanol mix. The government plans to increase the mix to 25%. As a way to reduce costs for Petrobras, it will cut taxes on ethanol producers, said the newspaper, which didn't reveal its source for the information.
With an increase in the ethanol mix in gasoline, Petrobras would import less gasoline to meet domestic demand.
On Monday, Mines and Energy Minister Edison Lobao said the government may increase the content of ethanol in gasoline sold in Brazil, but only if sugar cane production grows sufficiently to permit ample ethanol supplies. In Brazil, the raw material for ethanol is sugar cane.
In October 2011, an ethanol shortage and price jumps led Brazil to reduce the percentage of ethanol mixed with gasoline at the pump to 20% from 25%. This followed a poor sugar cane harvest, which reduced Brazil's ethanol output, causing the price of the alternative biofuel to skyrocket and become less competitive against its fossil-fuel substitute.
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