By David Brough

* Pace of renovation of cane fields picking up - Jank

* Brazil needs to invest in new cane varieties, mechanisation

* More transparent gasoline pricing policy sought

Brazil's ethanol taxes should be cut to make biofuel more competitive with gasoline for the Brazilian motorist, cane industry leader Marcos Jank said on Thursday.

Jank, president and CEO of sugarcane industry association Unica, told Reuters the ethanol industry in Brazil faces low margins, which is discouraging new investments.

Unica wants to see improved incentives for Brazilian industry to produce ethanol so that margins can improve.

"The only way to do that is a lower rate of taxation of ethanol compared to gasoline," Jank said in an interview during a visit to London to take part in a FT conference on sustainable agriculture in Brazil.

Sugarcane in Brazil, the world's top sugar producer and exporter, can be allocated by mills to make either sugar or ethanol biofuel, depending on price.

Brazil's flex fuel vehicle fleet can be powered by gasoline or ethanol or a combination of both.

Ethanol is taxed at a higher level than gasoline in Brazil when measured in terms of ethanol's lower energy content per gallon, Jank said, adding that it is taxed both at the federal and state level. Ethanol taxes vary from state to state.

Unica wants cuts in federal ethanol taxes in order to make ethanol more competitive with gasoline in Brazil.

"Ethanol has lost competitiveness to gasoline, and there is an economic equation that needs to be solved," he said.

"If we solve that, investments will come. We need new investments. We need new plants."

Jank said he did not expect Brazilian authorities to change the fixed domestic gasoline price any time soon but he wanted to see greater transparency in the setting of gasoline prices in the medium and longer terms, perhaps by using a formula linked to the oil price.

NEED FOR INVESTMENT

A poor cane crop in Brazil in the 2011/12 season, due to a combination of ageing cane plants and adverse weather, meant that mills had not been able to crush cane at full capacity.

Jank said the cane industry needed to make investments in areas such more productive cane varieties and increased mechanisation to reduce the cost of producing sugar.

Brazilian sugar and ethanol production costs have risen due to rising land and labour costs as the economy has boomed and the real currency has been strong.

Jank did not give an estimate for Brazilian costs of sugar production, which varied from mill to mill, but said the higher costs had been a factor in driving up global sugar prices.

He declined to forecast 2012-2013 cane production in the centre-south of Brazil, the main cane growing region, which has suffered from prolonged dry weather, saying it was still too early to give accurate predictions.

Several industry analysts have said the centre-south is expected to produce more in 2012/13 than the roughly 490 million tonnes seen in 2011/12.

Market talk that production in 2012/13 could be less than expected contributed to a rally in raw sugar prices to three-week highs earlier this month.

Jank said renovation of cane fields was picking up in Brazil, auguring for higher production in future.

"The pace of renewal of cane has come back to more regular levels," he said.