Last week, BR Research published an attempt to quantify the output of Pakistan’s distillery industry, in absence of verifiable numbers available from the sector (Read: Sizing Pakistan’s ethanol market, published on May 24, 2019).

As useful as it may be to measure industrial output, the attempt is of little relevance unless it assigns a dollar value to market size. And dollar value it is, considering industry representative’s claim that most of country’s ethanol output is geared toward export markets.

That makes sense, as a sifting exercise through PBS 8-digit export data reveals an interesting nugget. Pakistan’s ethanol export volumes – as reported by PSMA – tally not with country’s total ethanol exports, but only with exports of beverage-grade indentured ethanol (HS code 2207.10).

Five years ago, industrial ethanol exports (HS code 2207.20) contributed close to one-third of total ethanol export value; however, this in recent years has declined to a paltry share – just four percent of total as of FY18.

In absence of clarity from the industry association (explained in previous column) and taking beverage-grade ethanol export figures published by PSMA as proxy for ethanol manufactured from cane-based molasses, an attempt may be made to place a dollar value on country’s ethanol export potential.

For starters, Pakistan has a long history of molasses export and the raw material has fetched a stable average per ton price over the last decade. Since late 1990s, distilleries have mushroomed, as millers diversified into ethanol production business to seek more value out of this dark sticky substance, which in 1960s used to be dumped into craters.

A glaring conclusion jumps out from the rudimentary analysis: even working with worst-case yield rates for molasses-conversion into ethanol, Pakistan’s ethanol potential appears significantly untapped. This conclusion is further cemented from the realisation that if none of the un-exported molasses were converted and instead exported directly, this by-production would probably fetch greater value on cumulative basis (over last six years), as has beverage-grade ethanol export as reported by PBS and PSMA.

Where really is all the remaining molasses disappearing, if not being converted into ethanol? What is the size of domestic ethanol consumption? The math does not add up. For its own sake, the industry association has some reckoning to do.