Vietnam will continue to develop its production of bio-fuel, despite the fact it has been slow to catch on.

According to the plan, all motorised vehicles in seven cities and provinces will use a type of bio-fuel known as E5 from December 2014, and it will be rolled out nationwide the following year.

The seven cities and provinces will be Hanoi, Ho Chi Minh City, Hai Phong, Da Nang, Can Tho, Quang Ngai and Ba Ria-Vung Tau.

E5 was released on the domestic market in August 2010, but the volume of sales has been lower than expected following Decision 177/2007/QD-TTg to develop bio-fuel by 2015 and towards 2025.

Ethanol fuel mixtures have "E" numbers which describe the percentage of ethanol in the mixture by volume. For example, E5 is 5 percent anhydrous ethanol, distilled from cassava, and 95 percent petrol.

Deputy Prime Minister Hoang Trung Hai said the use of bio-fuel products should be promoted to diversify national energy sources.

The Ministry of Industry and Trade reported that the production, distribution and use of bio-fuel products in Vietnam face many challenges, including high production costs, slow development of distribution systems and customers' preference for traditional fuel.

Slow distribution has hampered sales, but the number of bio-fuel producers has increased, the ministry said.

The ministry said at the end of 2012, Vietnam had six plants producing bio-fuel with a total capacity of 535 million litres per year.

However, only 20 percent of the total output was used in the domestic market through the distribution of 175 petrol stations in 34 provinces mainly owned by PetroVietnam.

The remaining of 80 percent was exported to Japan , the Republic of Korea and the Philippines at a low price.

Enterprises said that one of the reasons for the slow development of the distribution system was that they needed to upgrade petrol stations to supply E5, but there were no incentive policies.

PetroVietnam said the Government should have long-term policies for enterprises that produce or trade in bio-fuel, including import tax exemption for equipment that cannot be produced locally, environmental tax exemption for petrol used to create bio-fuel, and a special consumption tax cut.

The State should also have support policies for the cultivation of cassava to meet production demands, PetroVietnam said.

Deputy Prime Minister Hai said the Ministry of Industry and Trade should work with bio-fuel producers and traders for the development of bio-fuel production and distribution systems.-VNA