E-10 Gasoline launched

[Naveed Yaseen]

MUSHTAQ GHUMMAN & ISHFAQULLAH SHAWL
ISLAMABAD (July 11 2009): The government has revived the unsuccessful E-10 (ethanol-10 and petrol 90 per cent) pilot project at a Pakistan State Oil (PSO) petrol pump here from Friday without giving incentives to the consumers.

The Economic Co-ordination Committee (ECC) of the Cabinet on May 19 allowed marketing of ethanol-10 motor vehicle fuel on trial basis at PSO stations on the insistence of Sindh-based lobby of sugar millers at a time when crude oil price in the international market was 140 dollars per barrel, said one prominent sugar mill owner on condition of anonymity on Friday.

"Now with its price down to almost 60 dollars per barrel, the project is no longer feasible," he added. Earlier Shaukat Aziz government had launched the pilot project of mixing ethanol with petrol on the same petrol pump located opposite the Ministry of Foreign Affairs, but the price of petrol at that time was lower than ethanol and the pilot project failed after six months. However, this time the project has been launched by Minister for Industries and Production Mian Manzoor Ahmad Wattoo.

Official circles are of the view that the decision to allow marketing of E-10 was taken to reduce reliance on imported petroleum products through the use of appropriate indigenous blendable substitutes. Anhydrous ethanol (ethanol with less than one percent water) is one such product, which can be blended with gasoline in varying proportions.

The sources said a subsidy of Rs 2.83 per litre for E-10 was also on the cards as the estimation was based on current prices and could change with the change in price of E-10. Molasses, a by-product in sugar production from sugarcane, was further processed in distilleries to produce ethanol, they said, adding that Pakistan was the seventh largest producer of sugarcane.

The production cost of one litre of ethanol is Rs 38.75 per litre. The estimated retail price of E-10 with current retail price of prime motor gasoline (PMG) will be Rs 57.66 per litre, which is nearly at par with the current price of gasoline.

Introduction of E-10 fuel at a time when international prices of crude oil have fallen drastically from 146.43 dollars per barrel in July, 2008 to 53.08 dollars per barrel in April 2009 may not appear economically viable (unless the price rises above 74 dollars per barrel), but the price of crude oil may increase again.

The blended fuel improves the combustion efficiency and reduces air pollution. Using E-10 would also provide energy security by gradually lowering reliance on fossil fuel.

The production of molasses in 1998-99 was 2.11 million tons, out of which 1.83 million tons was exported at an average price of Rs 1075.25 per ton. After a decade, molasses production rose in 2007-08 to 2.66 million tons, whereas exports declined to 80 million tons, and export price increased to Rs 4,471 per ton, an increase of 315.8 percent over the average export price per ton in 1998-99. Recently, the government has levied 15 percent regulatory duty on export of molasses.

The Industries Ministry has already been strongly criticised by Pakistan Sugar Mills Association (PSMA) and Ministry of Commerce (MoC) for attempting to increase recently imposed 15 percent regulatory duty on molasses in a blatant effort to benefit ethanol manufacturers.

The imposition of regulatory duty will harm trade relations between Pakistan and the European Union (EU), as exporters have finalised several memoranda of understanding (MoUs) with the EU partners and, therefore, the date of affectivity of the regulatory duty will have an impact on these agreements.

The sugar industry experts are of the view that imposition of RD on molasses export has negatively impacted on exporters, who will have to cancel deals with their European buyers, and renegotiate with them. The money earned from export of molasses was much higher than the ethanol manufacturers earned through so-called value-addition.

"The trend to shift the burden of one unproductive industry on another by imposing duty was unjustified," said one stakeholder. The sources said that the Industries Ministry, which was reportedly playing into the hands of the mafia, had also submitted a summary to the Economic Co-ordination Committee (ECC) of the Cabinet in May 2009 regarding introduction of Ethanol-10, blended fuel in Pakistan.

One of the government's top officials told this scribe that the government should procure ethanol from local industry at international rates to minimise its export. However, the final decision, is likely to be taken by the ECC in its meeting next week. The incentives package, the sources said, were discussed at an inter-ministerial meeting on Friday, presided over by the Minister for Industries who offered to inaugurate the E-10 pilot project.

E-10 GASOLINE TO HELP REDUCE IMPORT BILL The launch of new fuel, E10 Gasoline being prepared by blending 10 percent ethanol with petrol is part of the government strategy to promote alternate energy resources, said Advisor to Prime Minister on Petroleum, Dr Asim Hussain while addressing the launching ceremony of the fuel.

"E10 will not only help the country in reducing its import bill in coming years but will also provide motorists with an economical fuel option," Dr Asim said. Asim said the petroleum prices were showing a downward trend in international market and hinted at lowering the POL prices in Pakistan by the end of this month if the global trend continues.

He said that 30 filling stations would be set up throughout the country for selling Ethanol-blended E10 fuel that would cost consumers Rs 2.40 less than common petrol.

It is learnt that Ethanol-mixed petrol would be sold Rs 2.40/litre less than the current petrol price. About 10 percent ethanol will be mixed in the petrol in preliminarily stage and the ratio will be increased with the passage of time. In first phase, the ethanol-mixed petrol will be provided from PSO petrol pumps in Islamabad/Rawalpindi and later on its sale will commence across the country.

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