Palm | Kelapa Sawit

BUENOS AIRES, Aug 10 (Reuters) - Argentina tightened its grip on the country's energy sector on Friday by ordering a tax hike on biodiesel exports, a move it said was needed to make domestic fuel prices more affordable, but denied market rumors that it will increase a soybean export tax.

The grains-rich South American country is the world's biggest exporter of biodiesel, a fuel made from soybean oil. The tax, which will go to 32 percent from 20 percent, will go into effect on Saturday, according to a government decree.

The European Union is by far the biggest market for Argentina, which shipped a total of almost 900,000 tonnes of biodiesel in the first half of 2012 for some $1.03 billion, according to industry data.

Government economist Axel Kicillof, who burst onto the national stage when he became the public face of Argentina's nationalization of energy company YPF YPFD.BA in April, justified the tax hike by saying that Argentines are paying more for biodiesel than are foreign buyers.

"This will reduce the domestic price of biodiesel," he told reporters.

Also on Friday the government issued a decree lowering the official price of domestic biodiesel by 15 percent to 4,405 pesos ($0.96) per tonne from 5,195.8 pesos.

"There's not enough demand in the local market to absorb all the biodiesel that's exported," an industry source told Reuters on condition of anonymity. "I think this will end up killing the industry."

Argentine biodiesel production in 2011 was 2.4 million tonnes, of which 1.7 million was exported for about $2.1 billion. The country plans to reach 4.5 million tonnes of annual production by 2013.

Argentine biofuels producers had hoped President Cristina Fernandez would soon raise the compulsory blend requirement for diesel sold domestically to 10 percent from the current 7 percent as a way to boost local demand.

But Kicillof dashed that idea during his comments to reporters. He also dismissed rumors that the government was mulling an increase of export taxes on soybeans, which is currently set at 35 percent.

"This is a better measure than ones that would increase soy export taxes. This is a better way to go," said Kicillof

Chatter about a possible tax hike on international shipments of soy and other raw grains has been in the markets from Chicago to Rosario over the last two weeks, putting downward pressure on prices.

TIGHTER STATE CONTROL

The Fernandez government controls corn and wheat exports through a system of curbs meant to ensure affordable domestic food supplies. The 59-year-old Peronist leader was re-elected last year on promises of increasing the government role in Latin America's No. 3 economy.

The seizure of YPF followed and then a decree was issued last month saying oil companies operating in Argentina must present an annual investment plan. They could face fines or other sanctions, such as the withdrawal of concessions, if they fail to comply.

With its ample water supplies and vast Pampas farm belt, grain powerhouse Argentina is the world's No. 2 corn exporter and No. 3 supplier of soybeans.

But the idle capacity of the country's crushing plants has risen recently due to lower-than-expected soybean output, caused by a drought that hit the Pampas during the 2011/12 growing season.

So, also on Friday, the government lifted a ban on soybean imports, which will now be available to help keep Argentine crushing plants busy.

"We want 100 percent of our biodiesel processing plants to be used by either domestic or imported beans," Kicillof said.