Brazil finance minister Guido Mantega stated that the government would also provide additional finance of BRL2bn ($998.5m) for ethanol reserves and tax credits for the chemical industry.

Mantega added that the funds, which are expected to commence in May 2013, are aimed at encouraging investments in the sector and increasing production to reduce demand for gasoline.

They can also ease the inflation, Mantega remarked.

The incentives are in the wake of record processing of sugar cane crop at ethanol mills with prices dropping for the crop and increase in gasoline imports from major companies including state-run Petroleo Brasileiro and Petrobras.

Brazil president Dilma Rousseff noted: "The ethanol sector is here to stay and, from time to time, we need to revisit it to see what we can do to help our producers."

"Sometimes the price provides returns, other times it doesn’t," added Rousseff.

The stakeholder of two ethanol plants, Grendene chairman Alexandre Grendene Bartelle was quoted by Bloomberg as saying that despite increase in investments for the sector through these incentives the new companies are not likely to fall for it.

"Maybe some companies will expand plantations or mills, but we won’t see companies making big investments in new projects," Bartelle added.