Brazil proposes rules to boost ethanol stocks

SAO PAULO (Reuters) – Brazil’s energy regulator has proposed rules to ensure sufficient stocks of ethanol fuel, its first move in plans to increase regulation of the stagnant industry and prevent a repeat of recent supply shortages.

Despite high prices for the biofuel and a massive expansion in the domestic fleet of cars that use it, Brazil’s roughly $30 billion a year sugar cane industry has struggled with sluggish investment and insufficient supply. Officials from President Dilma Rousseff’s government have criticized ethanol producers for what they describe as a failure to invest and plan.

In a statement late on Friday, the ANP energy regulator said ethanol producers should by March 1 each year have stocks equivalent to 8 percent of their output of April the previous year. Distributors should by the same date have stocks equivalent to 15 days of their average sales of gasoline mixed with alcohol during the November-January period.

The ANP also proposed that distributors could be suspended from selling gasoline if they did not ensure sufficient stocks of ethanol.

Companies in the ethanol industry have 20 days to respond to the ANP’s proposals as part of a public consultation over the new policies.

Brazil’s left-leaning government assumed regulatory control of ethanol for the first time earlier this year. Some investors in the sector had feared stronger government intervention, such as setting production targets.

Multinational companies including Royal Dutch Shell, Noble Group and Glencore have poured billions of dollars into the sector over the past year, although they too have focused more on acquiring existing mills than expanding production.