Petition for linking price of ethanol based gasoline with power, gas tariff hike

Ethanol industry has petitioned the government to link the price of ethanol based motor gasoline with hike in power and natural gas tariff. Acting Petroleum Minister G A Sabri briefed President Asif Ali Zardari on ethanol blended gasoline in a high-level meeting on November 8 in President House.
According to the presentation available with Business Recorder, refineries will suffer a loss of about $44 million per year on the export of additional surplus of 135,000 tons naphtha due to blending of ethanol in gasoline. Pakistan produces more gasoline than its requirements and surplus is exported as naphtha (raw gasoline).
Gasoline ex refinery price is $578 per ton while naphtha export price is $250 per ton, a loss of $328 per ton on the export of surplus naphtha. In such circumstances, oil refineries would reduce their throughput followed by reduction in the diesel and furnace oil. Ethanol industry has proposed the government that contract price of fuel grade ethanol should be linked with the export price of molasses and reviewed on monthly basis.
The Petroleum Ministry has calculated the cost of ethanol for blending with gasoline at $611 per ton based on molasses export price of $70 per ton that would increase to $675 per ton based on $80 per ton molasses export price. The ethanol price will be $738 per ton and $801 per ton based on $90 per ton molasses export price and $100 per ton respectively.
The Petroleum Ministry has worked out the max ex depot sale price of E-10 based ethanol blended gasoline at Rs 77.89 per litre, 78.40 per litre, Rs 78.91 per litre and Rs 79.43 per litre following price of molasses at $70 per ton, $80 per ton, $90 per ton and $100 per ton respectively.
These prices include the Petroleum Development Levy (PDL) of Rs 28.84 per litre, 0.30 per litre freight charges, Rs 1.21 per litre to Rs 1.28 per litre Oil Marketing Companies (OMCs) margin, 0.20 per litre OMCs return on the infrastructure investment, Rs 1.39 per litre to Rs 1.47 per litre dealers commission and 16 percent General Sales Tax.
Pakistan produces more gasoline than its requirements and surplus is exported as Naphtha (raw gasoline). Pakistan's existing production capacity of fuel grade ethanol is 271,800 tons annually against it total potential 400,000 tons production per annum. Local price of ethanol will depend on the purchase price of molasses by the distilleries and government intervention is necessary to control the price of molasses which is exportable commodity and an agricultural product with basic use in cattle feed.
The exporters exported 234,060 tons ethanol in nine months from January to September 2008 that export was 255,000 tons in the calendar year 2007. Pakistan Automobile Manufacturing Association (PAMA) has rejected 10 percent ethanol blending with gasoline and noted that ethanol causes corrosion to aluminium parts and affects rubber and resin components.
It reduces physical properties of rubber and resin components including strength. It affects the painted parts and adhesives and increases NO x an emission in exhaust. PAMA has recommended maximum 3 percent ethanol blending with gasoline.