Budget 2014: Ethanol chief unfazed by wind-down of support

Manildra's Bomaderry plant is the largest ethanol producer in Australia.
Manildra's Bomaderry plant is the largest ethanol producer in Australia.

THE Abbott government’s announcement it will stop the Ethanol Production Grants Program will not affect operations at the country’s biggest ethanol producer Manildra’s Bomaderry plant, according to owner Dick Honan.

Mr Honan said he preferred not to comment on the announcement the government would scrap the grants program, saving $120 million over six years from 2015-16.

“It is not going to affect how we do things but I’m not willing to comment,” Mr Honan said.

It was a starkly different reaction to the one Mr Honan gave in February this year when he dismissed a report by the Bureau of Resources and Energy Economics (BREE) that questioned the effectiveness of the ethanol industry.

Mr Honan warned if the federal government withdrew its support the Bomaderry plant would have to close.

The report raised concerns about the ethanol industry that receives $108 million a year from the federal government’s grant program, introduced by the Howard government in 2002.

Manildra’s Bomaderry plant, which produces 300 million litres of ethanol a year, receives the lion’s share of the subsidies.

Mr Honan had warned if the federal government withdrew its assistance for the industry, it wouldn’t be viable for the renewable fuel industry in Australia if the subsidy was withdrawn.

“Legislation was passed in 2011, bipartisan legislation, to extend the excise exemption on ethanol and biodiesel to 2021,” he said at the time.

The government said it would achieve net savings of $120 million over six years from 2015-16 (including $24 million in 2018-19, $32 million in 2019-20 and $40 million in 2020-21) by ending the Ethanol Production Grants Programme on June 30 2015.

The fuel excise on domestically produced ethanol will be reduced to zero from July 1, 2015 and then increased by 2.5 cents per litre per year for five years from July 1, 2016 until it reaches 12.5 cents per litre, which represents 50 per cent of the energy content equivalent rate.

The excise equivalent customs duty for ethanol will be retained at 38.143 cents per litre.

Manildra’s Bomaderry plant has 300 employees, while there are also extra staff at three other locations in Gunnedah, Manildra and Narrandera who supply raw materials for the company’s operations.