Government support for direct sale of ethanol fuel from producer to gas station
Government support for direct sale of ethanol fuel from producer to gas station – CNPE Resolution n. 02/2020
Authors: Marcos Joaquim Gonçalves Alves and Bárbara Teles
M.J. Alves e Burle Advogados e Consultores – Advocacy Brasil
Alternatives to market opening and increasing competition to the oil and gas supply chain are included in governmental discussions as one of the possibilities to deal with current economic crisis and attract private investments to the whole sector. In this scenario, medium-term solutions emerge to ensure stability and predictability to the price of all fuels.
Changes to legislation and regulation of oil and gas’ downstream are highly under discussion since the truck drivers’ strike in May 2018. Most of them are concentrated to establish business freedom to all parts of the fuel production. Those will provide great opportunities for all players in this field.
On July 1st, 2020, was published by the National Council on Energy Policy (CNPE) guidelines for implementation of direct sale of ethanol fuel from producer to gas station. Current regulation (in force) requires that the sale of any fuel must pass through a distributor. With a direct way, the distributor will not be the only option for producers’ sales, as they will be able to contract directly with gas stations.
The official publication of Resolution n. 02/2020 was expected since its approval during the last CNPE’s meeting, on June 4th, 2020.
At the beginning of Bolsonaro’s Government, in 2019, the CNPE Resolution n. 12/2019 was announced as a first step to promote competition to fuel supply chain. Among important identified measures, direct sale was highly recommended, and it gains strength since then.
The recent Resolution (n. 02/2020) reinforces the previous commitment and establishes that the Brazilian Agency for Petroleum, Natural Gas and Biofuels (ANP), the governmental body responsible for regulating this sector, will consider the following guidelines to enable direct sale of ethanol: competitive isonomy in fiscal aspect and maintenance of tax collection amount; availability to the interested agents to adopt this modality of commercialization; and same ethanol’s standards and quality specifications for all ways of selling.
It also adds a new deadline for the conclusion of ANP’s studies about the implementation of possibility of direct sale. It establishes that the governmental agency has until October 30th, 2020, to deliberate on this matter, approving it or not, based on assessments that have been made. There is a possibility to the President of CNPE (the Brazilian Minister of Mines and Energy) to extend this term, as long as there is a justified necessity. As studies are already in an advanced stage of internal discussion, we consider that the extension will not be required.
There is also a brief change in tax terms. While in 2019 Resolution was expressly recommended to the Ministry of Economy to analyze the implementation of a tax model based on a single-phase regime (monophasic contribution), the new Resolution makes changes to it. It proposes an analysis of actions that have to be accomplished to adapt tax rules in order to allow direct sales, ensuring current tax collection amount.
This fiscal adaptation is essential because in current legislation (in force) both producer and distributor are responsible for paying some of the taxes for ethanol’s commercialization. In the direct sale model and possibility of exclusion of the distributor in this operation, there could be impacts in state revenues, which will be avoided with right adjustment of tax rules. Previous Technical Notes from the Ministry of Economy (as an example, the n. 13/2019) have stated the recommendation of monophasic contribution concentrated in the producer.
President Bolsonaro had made a few statements about fuel prices and the oil and gas market. After the official publication of CNPE Resolution, he used his social networks to endorse it, reinforcing that direct sale of ethanol can provide competition and reduce its final price.
The possibility of direct sale for ethanol is on the governmental agenda and its approval could be a regulatory advance based on structural changes on supply chain. A market opening for the oil and gas sector is expected by most of companies, governmental bodies, and society, as long as the model’s transition is based on granting legal certainty to all investments. The introduction of direct sale can represent a first step to fair prices to liquid fuels in Brazil.
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