SP and MG announce reductions in ICMS rates on hydrated ethanol

The governments of São Paulo and Minas Gerais announced this Monday (18) reductions in the ICMS charged on hydrated ethanol.

The cuts come in key markets for biofuel that competes with gasoline.

In São Paulo, the largest consumer market and producer of ethanol in Brazil, the collection of state tax fell from 13.3% to 9.57%.

The estimate of the São Paulo government is that the cut will lead to a drop of US$ 0.17 in the liter of ethanol at the pumps. The measure will have an impact of R$ 563 million on state revenue by the end of the year, with a waiver of monthly revenue estimated at R$ 125.1 million.

“Keep an eye out and activate Procon if the value (of fuel) does not fall,” said São Paulo governor Rodrigo Garcia (PSDB), in a note. Garcia will seek re-election to Palácio dos Bandeirantes in the October election.

In Minas Gerais, the ICMS for biofuel was reduced from 16% to 9%.

“In addition to easing the pockets of miners, the tax reduction will maintain the competitiveness of biofuel, an important generator of jobs in our state,” wrote Minas Gerais governor Romeu Zema (Novo), also a candidate for reelection, on Twitter.

Last month, the two states had announced cuts in the state tax on gasoline and other services, following the enactment of the law that limited the collection of ICMS on fuel, electricity, communications and public transport.

Analysts had predicted that maintaining the previous level of taxes for ethanol could reduce the price advantage over gasoline in some markets.