OREANDA-NEWS. On May 28, 2008 The Russian Union of Industrialists and Entrepreneurs, or RSPP, said that the country needed new legislation if it was going to become a leading producer of biofuels, as they are currently taxed the same as vodka.

Excise duties on bioethanol make it unprofitable to produce in the country, a situation that leaves a government call for 30 new plants for the alternative fuel unrealizable, participants at a joint meeting of the lobby group's agriculture and energy committees said.

"Russia could become one of the world's leading biofuel producers, but there are lots of hurdles ahead of us," said Ivan Obolentsev, head of agriculture committee.

"Currently, with bioethanol, you pay the same excise duty as for vodka or industrial alcohol," State Duma Deputy Mikhail Sutyaginsky said on the sidelines of the meeting.

Sutyaginsky said he had taken the first step toward introducing new legislation by proposing amendments to the law on production and distribution of alcohol products.

"I suggested to add the definition of bioethanol," Sutyaginsky said. "The adoption of a law on biofuels could take up to 12 months."

Pavel Bezrukikh, head of LUKoil's alternative energy division, said the law needed to be clear before the country's energy companies could get involved in producing biofuels.

"The development of the bioethanol market is absolutely impossible in Russia, until the law says what rules the producers play by," Bezrukikh said.

The country currently has no biofuel plants.

In March, then-Prime Minister Viktor Zubkov said the government wanted to see a total of 30 bioethanol plants built across the country, raising annual output to 2 million tons of the fuel.

"We are going to be actively involved in bioethanol production," Zubkov said, adding that the government would roll out a biofuels program later this year.

At the time, Zubkov did not specify when the 30 plants would be built or who the investors would be, however.

One plant is to be built in the Omsk region by 2010 by local agrobusiness holding Titan-Agro, company official Sergei Ryabov said.

"It is quite a costly project, but we've got government support," Ryabov, head of the company's regional and strategy development, said on the sidelines of Tuesday's meeting.

The \\$130 million plant plans to produce 150,000 tons of bioethanol per year, and will be 70 percent financed by the state and bank loans, he said.

"We will export a large part of the fuel to Europe, as the market for biofuels hasn't been created in Russia yet," Ryabov said.