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Bounty (Citric Acid) Bill 1991



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House: House of Representatives

Portfolio: Industry, Technology and Commerce

Purpose

To provide for the payment of a bounty on the manufacture of citric acid by fermentation of carbohydrates in air lift fermenters in Australia for the period 12 March 1991 to 31 December 1995.

Background

Citric acid is an organic acid used to enhance flavours, to increase preservative effectiveness, to improve gel strength, and to conserve energy by reducing heat-processing requirements in fruit and vegetable processing. In pharmaceuticals, citric acid can contribute effervescence and improve flavour in certain medications. In cosmetics and toiletries, citric acid is used in hair rinses, permanent wave neutraliser solutions, low-pH shampoos, lotions, creams, and toothpastes. Citric acid is nontoxic, noncorrosive, and biodegradable. It is used in metal-cleaning applications and as an ingredient in laundry and dishwashing products. In the textile industry it is used in production of soil-release fabrics, carpeting, and dyestuffs. Citric acid is also used in processing a number of minerals, in recovering sulfur from sulfur dioxide emissions in waste gas, as an aid in recovery of secondary oil deposits, in formulating adhesives, and in the concrete and cement industries.

In 1986 two Melbourne scientists announced that they had developed an improved citric acid fermentation process. The scientists claimed that the improved process could cut production costs by 25%. Mechanical agitators are used in conventional citric acid fermenters to keep the micro-organisms which produce citric acid circulating in their sugar nutrient medium. The improvement the two scientists allegedly made was to use air bubbles rather than mechanical agitators to keep the micro-organisms circulating. The two scientists established a company - Sirius Biotechnology Ltd (Sirius) to produce citric acid using the new fermentation process. In the Australian Financial Review of 7 November 1986, a director of Sirius is reported as saying that at present, citric acid could be produced for about $2500 a tonne, while the new process could save $300 a tonne, mainly in energy costs.

In the Australian Financial Review of 22 November 1989, it is reported that Sirius had made its first shipment of 50 tonnes of citric acid to local food and beverage manufacturers; that between November 1989 and March 1990 Sirius would concentrate on bringing its plant up to speed; and that the company hoped to win between a third and a half of the Australian market. Australia imports approximately 6000 tonnes a year of citric acid at a cost of approximately $15 million.

In the Age of 13 December 1990, it is reported that Sirius had ceased production of citric acid. The reason given by one of the directors of Sirius for the cessation of production was that the pricing scheme designed to protect Australian sugar growers had required the company to pay double the international price for the sucrose or glucose necessary for its fermentation process.

The bounty proposed by this Bill was announced by the Government in its 12 March 1991 statement - Building a Competitive Australia. The reason given in the statement for the bounty was to provide support to enable the continued development and commercialisation of leading edge Australian fermentation technology. As well, changes announced to the level of protection for the sugar industry should result in a reduction in the cost of sugar for the citric acid industry (note: for further information on these changes refer to the Digest for the Customs Tariff Amendment Bill 1991).

In the Australian Financial Review of 21 March 1991, it is reported that the bounty proposed by this Bill has caused allegations `... of another Kodak style bail out'; will assist the only Australian manufacturer of citric acid - Sirius; and protect the million dollar investment made in the development of the product by its major shareholders and the CSIRO. In the same article it is reported that an adviser to the Minister for Science and Technology rejected claims that the bounty was another Kodak and that receipt of assistance by Sirius would depend on its production levels and a commitment from Sirius of between $7 million and $10 million in research and development and plant capital.

In the Explanatory Memorandum to this Bill, the cost of the proposed bounty scheme is estimated to total $7.27 million over the life of the scheme.

Main Provisions

The Bill will have effect from 12 March 1991 (clause 2).

`Bountiable citric acid' is defined in clause 4 to be citric acid produced by the fermentation of carbohydrates in air lift fermenters.

Clause 6 provides that bounty will be payable to the producer of bountiable citric acid so long as the producer is registered and production is carried out in Australia before 1 January 1996.

Bounty will not be payable where the Comptroller of Customs (the Comptroller) is satisfied bountiable citric acid is to be directly or indirectly exported to New Zealand (clause 7).

The payment of the bounty is dealt with in Part 3 (clauses 8-14) of the Bill. Applications for the bounty are to be lodged by 31 March 1996 (clause 8).

The rate of bounty will be:

*$700 per tonne of bountiable citric acid between 12 March 1991 and 30 June 1992;

*$550 per tonne of bountiable citric acid between 1 July 1992 and 30 June 1993;

*$350 per tonne of bountiable citric acid between 1 July 1993 and 30 June 1994;

*$250 per tonne of bountiable citric acid between 1 July 1994 and 30 June 1995; and

*$150 per tonne of bountiable citric acid between 1 July 1995 and 31 December 1995 (clause 9).

Clause 10 authorises the payment of advances of bounty funds, at the Comptrollers discretion, and provides for the repayment of advances where the advance exceeds the actual amount of bounty payable or the bounty subsequently ceases to be payable to the person. Advances may be deferred where insufficient funds have been appropriated to meet valid claims in a financial year (clause 11).

Clause 12 provides for variations of excess claims where the producer has become aware of the excessive claim and clause 13 provides a general power to adjust claims where there has been an overpayment of bounty. In the latter case, where the excess is not due to a fault of the person who lodged the claim and the cost of recovery is high and the chances of successfully recovering the funds is low, and the excess is $25 000 or less, the Comptroller may decline from attempting to recover the excess.

Part 4 (clauses 15-26) of the Bill deals with administration. Clause 15 provides for the registration of producers of bountiable citric acid. Clause 17 will allow the Comptroller to require a person eligible to receive the bounty to lodge a security and the bounty will not be payable if the person does not comply with this requirement. Clause 19 will allow Customs officers to enter premises, other than residential premises, occupied by a registered person, while clause 20 provides for the entry of other premises with consent or subject to a warrant. Clause 23 contains a number of offence provisions, including to knowingly obtain, or try to obtain, a bounty that is not payable or to knowingly or recklessly mislead an authorised officer. Clause 25 provides for the recovery of bounty payments where the person is convicted of certain offences (e.g. obtaining a bounty that is not payable).

Clause 27 provides for annual returns dealing with the payment of bounty to be provided to Parliament.

Bills Digest Service 25 March 1991

Parliamentary Research Service

For further information, if required, contact the Science, Technology and Environment Group on

06 2772420.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Commonwealth of Australia 1991

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1991.