Pakistan sugar mill producers say ethanol production will reduce oil imports by $500 million

March 4, 2008

In Pakistan, the Pakistan Sugar Mills Association (PSMA) said that the introduction of ethanol production will reduce the country’s fuel bill by $500 million and improve the country’s balance of trade. The association’s chairman said that the focus on molasses production and export would result in less export earnings than the offset effect of reducing oil importation costs through production of sugar cane ethanol.

Pakistan oil marketing companies, at a meeting of an ethanol blending task force, called for Pakistan to explore alternatives to ethanol. The OMCs said that there was no shortage of gasoline in the country; shortages are most acute in the diesel market. Pakistan, which is facing up to $11 billion in oil imports, had formed the biofuels task force to investigate the production of 65,000 metric tons of biofuels required to fulfill a 5 percent ethanol mandate.

Oil marketing companies have been critical in slowing the conversion to biofuels in neighboring India as well. A recent eport in the Economic Times said that Indian oil marketing companies, which are experiencing cash flow difficulties, are unable to switch to E5 blends that would save them $1.52 for every gallon of petrol replaced with ethanol. The reason? A complex web of state regulations and tax issues as well as entry barriers in various states.

Earlier, the Indian central government revealed a plan to slash taxes on ethanol as an incentive to stimulate demand. Currently, excise duty is 15 percent, plus state taxes of 4 to 20 percent, plus import fee, permit fee, license fee, administration fee and state excise taxes.

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Written by Jim Lane · Filed Under International