The decision was made at the request of the Prime Minister at a recent meeting in Hanoi discussing the pricing mechanism for E5 petrol— fuel that contains five per cent bioethanol.
Since late last year, E5 petrol has been the principal fuel sold in Hanoi, HCM City, Haiphong, Danang, Can Tho, Quang Ngai and Ba Ria-Vung Tau in accordance with a decision by the Prime Minister.
Cassava chips are the principal raw material for domestic ethanol production at the nation’s seven big ethanol plant and production facilities, which use an estimated 500 million litres of ethanol annually.
Currently the price of domestic chips has been soaring at record high levels of US$227.5 per tonne fuelled by increased demand from China and exacerbated by inadequate supply.
China has on average historically purchased roughly 90% of the cassava exported from Vietnam and other growers in the region such as Laos, the Philippines and Nigeria, which it uses principally for ethanol and animal feed production.
Soil used for cassava cultivation becomes exhausted after two or three years and crops must be rotated to replenish it with vital nutrients.
Due to high levels of production over recent years and inadequate attention to sustainability the current supply of cassava chips is lower than anticipated and at a level barely sufficient to meet domestic demand.
Accordingly, to alleviate the situation, the MoF has levied a 5% and 3% duty on the now tax free cassava and ethanol exports respectively in an effort to thwart foreign demand and inflationary pressure.
Another important task is the re-zoning of cultivation areas and to devise sustainable intensive farming methods and boost production.
Vietnam now has 450,000 hectares of cultivation areas, yielding around 9.5 million tonnes of fresh cassava (equal to 3 million tonne dried cuts or powder).
The central highlands region is the key cultivation zone which accounts for 27.7% of total areas and 26.2% of the country’s total output.
However, Central highlanders have not paid due attention to growing cassava intensively, just having focused on expanding cultivation areas, instead of increasing output.
Thus, the central highland steering board has urged provinces to implement technical solutions to grow cassava sustainably, ranging from choosing variety, expanding connectivity between farmers, businesses and processing factories.
Vietnam's cassava chip exports for the three months leading up to April surged 24% on-year on the back of the increased demand from China, according to the Ministry of Agriculture and Rural Development (MARD).
For the January-March period, Vietnam exporters shipped 137,000 tonnes of chips valued at US$420 million to all foreign markets, up 24% in volume and 22.7% in value against last year’s corresponding period.