Government issues new MP to authorize direct sale of ethanol to gas stations

The government edited a new MP (Provisional Measure) to authorize the direct sale of ethanol from producers to gas stations. The Executive had already taken the initiative through MP, but the proposal was modified by Congress and ended up being vetoed by President Jair Bolsonaro (PL).

MP 1063/2021 (from August last year) provided for the direct sale of producers to gas stations, but parliamentarians changed an excerpt to extend the measure to cooperatives – which were already entitled to a reduction in PIS/Cofins in their operations. Congress approved the text in December.

The Economy Ministry asked the president to veto the amended passage, saying that a waiver for ethanol sales would be created for cooperatives without budget provision – which would violate the Fiscal Responsibility Law. In addition, the ministry interpreted that the text would generate a competitive distortion in favor of cooperatives.

“The legislative proposal is contrary to the public interest and incurs a vice of unconstitutionality, for creating a tax waiver without proper budget provision and for distorting sectoral competition”, said the Economy. The president sanctioned the text with the vetoes in January, creating law 14.292/2022.

With the vetoes, the main articles of the law were left out. The Planalto Palace informed at the time, however, that direct marketing was still possible since October last year, because of a resolution by the ANP (National Petroleum Agency). Even so, the sector complained that the issue lacked legal certainty.

The MP published this Tuesday (15) in the Official Gazette again provides for direct sales and extends the measure to cooperatives. This time, however, it establishes rates to be charged to them in operations.

“The set of measures implemented has no fiscal impact, as it does not give rise to tax waivers in the ethanol production and marketing chain”, says the government in a text about the MP published this Tuesday.

According to the text, the producing agent, the trading company and the importer of hydrated fuel ethanol are authorized to sell it with the distributing agent, the retail fuel reseller, the carrier and the foreign market. The cooperative, on the other hand, is equivalent to a producer agent, although it has rules regarding taxation.

This Tuesday’s measure also revokes MP 1.069/2021, published in September to accelerate the effects of the previous measure as a way to benefit producers amid the harvest – which runs from April to December.

In the government’s view, direct sales are important to remove links in the chain, reducing costs and generating the potential to lower prices for the final consumer.

Currently, says the government, there are more than 350 sugar and ethanol production units in the country — many of them close to urban centers. The measure prevents ethanol from a plant from having to be moved to a distribution base and then returned to a post close to the production center.

Despite the three MPs on the subject, however, the direct sale of ethanol from the plants to the gas stations has had almost zero market share so far, as published by leaf.

For fuel distributors, the low adherence reinforces the thesis that the measure will not have a great impact on the market. Ethanol producers complain that the model has legal uncertainty and, therefore, sales have not yet taken off.

According to a survey carried out by consultant Dietmar Schupp, based on data from the ANP (National Agency for Oil, Gas and Biofuels), this modality represented 0.14% of ethanol sales in November and 0.21% in December.

The price of fuel is a concern of Bolsonaro and the allied base, who fear the impact of the issue on the elections and have sought different initiatives to address the issue.

As published by leafthe government and the top of Congress will present a formal consultation to the TSE (Superior Electoral Court) to clarify whether it is possible to reduce the price of fuel without violating the electoral law.

In both Houses of Congress, reducing fuel prices is the main agenda at the moment.

In the Chamber, government deputy Christino Áureo (PP-RJ) filed a PEC (Proposal for Amendment to the Constitution) with the approval of the Planalto.

In the Senate, another one emerged, dubbed “PEC Kamikaze” by the economic team. She had the support of government ministers and the senator and son of the president, Flávio Bolsonaro (PL-RJ).

Recently, the president of the Chamber, Arthur Lira (PP-AL), started to defend the approval of the project that freezes the collection of ICMS (Tax on the Circulation of Goods and Services) on fuels before Congress advances in the discussion of the PEC that affects in federal taxes.