Transfer of fuel ICMS cut depends on inventory renewal, says sector

The fuel distributors claim that they need to dump stocks already purchased before starting the transfer of the ICMS cut approved by Congress in a law that established a ceiling for the state tax on these products.

The expectation is that the full impact of the measure will only be felt by the consumer between ten and fifteen days after the new rates take effect. The sector fears that the delay will generate questions and pressure from the government to speed up the transfer.

The measure mainly affects gasoline, whose price should have an average cut of R$ 0.225 per litre, according to calculations by consultant Dietmar Schupp, a specialist in fuel taxation. In diesel, almost all states already practice rates below 17%.

The law that sets a ceiling for ICMS was approved on Wednesday morning (15), after technical flaws in the voting system of the Chamber of Deputies forced a new vote. The change faces resistance from states, which have not yet decided whether to go to court to question it.

The ICMS ceiling is part of a package of government-sponsored legislative projects to try to reduce fuel prices, reducing the negative impacts of inflation on Bolsonaro’s popularity on the eve of the elections.

The fuel sector supports the measures, but argues that the transfer will not be immediate, as distributors have stocks purchased at previous rates.

“Once confirmation of the new rates in each state, lower than the current ones in the vast majority of cases, a new price reduction will reach consumers, when stocks have also been renewed”, says, in a note, the IBP (Instituto Brasileiro of Oil and Gas).

Taxation on fuels is carried out through the tax substitution system, concentrating tax collection on refineries and importers. Thus, when buying a load, distributors already pay federal and state taxes on the invoice.

According to industry sources, transfers will be faster to markets close to refineries, where distributors’ inventories are usually lower. In markets supplied by imports, companies tend to have more products in stock to avoid supply problems.

The industry fears a repeat of the clash that took place during the 2018 truckers’ strike, when the government forced companies to immediately cut prices after granting a diesel subsidy. The damages are discussed in court to this day.

The expectation now is that, in a hurry to give an answer to the voter, Bolsonaro will start an offensive against distributors and stations for agility in the transfers of the ICMS reduction, with impacts on the operating margins of companies.

According to Schupp’s calculations, the ICMS ceiling will reduce the price of gasoline between R$ 0.133 per liter, in Amapá, and R$ 0.472, in Rio de Janeiro, which has the most expensive rate in the country. Hydrous ethanol will fall between R$0.036 in Bahia and R$0.325 in Rio de Janeiro. In São Paulo and Minas Gerais there is no reduction.

In the case of diesel, there is no impact in 17 states and the Federal District, where the rate is already lower than 17%. In the others, the cut will be only R$ 0.01 per liter. For this reason, truck drivers classify the average as ineffective and threaten with stoppages.

Schupp’s accounts consider that the rate will be applied to the reference price currently used to calculate the tax, which has been frozen since the end of 2021. If states increase the reference price, there may be price increases.

Any further price increases at refineries could also overshadow part of the gain. With oil above US$ 120 per barrel and the dollar above R$ 5, Petrobras is under pressure to promote new adjustments, but the government is trying to postpone the decision.

According to calculations by Abicom (Brazilian Association of Fuel Importers), the difference between the domestic price of gasoline and international quotations is R$ 0.67 per liter this Wednesday. In the case of diesel, the lag is R$ 1.08 per liter.