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The agricultural ministry will launch a project to promote the use of ethanol, made mainly from sugar cane, as an additive to gasoline in response to soaring oil prices, officials said Tuesday.

The Agriculture, Forestry and Fisheries Ministry will seek a budget of 10 billion yen in fiscal 2007 to build ethanol plants capable of producing tens of thousands of kiloliters of ethanol a year in several locations around the country to supply local markets.

The plan calls for ethanol producers, gas stations, sugar cane suppliers, local governments and others to form local consortiums to map out production and distribution plans. The ministry will pay for half the cost of the program, including ethanol plant construction and installation of ethanol pumps at gas stations.

By law, ethanol content is limited to 3 percent in ethanol-gasoline fuel, but rising oil prices have led to calls for greater use of the renewable fuel.

Ethanol is being produced at six demonstration plants, with one plant in Hokkaido, Yamagata, Osaka and Okayama prefectures and two in Okinawa, but the plants produce only a few liters per year.

Ethanol in Japan is made from sugar cane scraps and from cane that is below commercial grade. An agriculture ministry official said greater use of ethanol will help stimulate the economies of sugar cane-producing areas.

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