ISLAMABAD (July 02 2009): The Ministry of Industries and Production is said to be manipulating to fix ethanol price, on behalf of some manufacturers, sources in the Ministry told Business Recorder. The Cabinet has imposed 15 percent regulatory duty (RD) on export of ethanol, a demand by a powerful lobby backed by the Industries Ministry. The benefit of this RD, as was expected, is reportedly nil. 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 (EU), as exporters have finalised several memoranda of understanding (MoUs) with EU partners and, therefore, the date of effectivity of the regulatory duty will have impact on these agreements. Sources said that opponents of this duty proved with facts and figures that the logic of value-addition given by the ethanol manufacturers was far from reality. Last year, sugar mills exported 10,774,98 tons of molasses, which is equal to 25,237 tons of ethanol. Analysts say that imposition of RD on molasses export will have a negative impact on Pakistan\'s 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 to another by imposing the duty was unjustified," said one stakeholder. Sources said that Industries Ministry, which is 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. The ECC allowed marketing of E-10 motor vehicle fuel on trial basis along with the direction to Petroleum Ministry to notify E-10 as motor vehicle fuel, and authorised Ogra to determine/notify ex-depot and retail price of E-10 for one litre. The ECC also directed all concerned to carry out amendments in the Ogra Ordinance. The ECC constituted a Committee comprising Ministries for Industries, Advisor to the Prime Minister on Petroleum, Secretaries Finance and Industries to consider and examine the incentive package proposed by Ministry of Industries. The committee would also devise mechanism for fixing of price of molasses to ensure that cost of ethanol production remains competitive and submit it to the next ECC meeting. The task of the committee is to propose the use of E-10 to keep its price at 10 percent less than that of gasoline. This will entail a financial implication of Rs 232 million annually and require exemption of ethanol component of E-10 from carbon levy and general sales tax (GST). Subsidy of Rs 2.83/litre for E-10 is also on the cards as the estimation is based on current prices and could change with change in price of E-10. Molasses, a by-product in sugar production from sugarcane, is further processed in distilleries to produce ethanol. Pakistan is 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 per barrel in July, 2008 to $53.08 in April 2009 per barrel may not appear very lucrative (unless they rise above $74/barrel) in pure economic terms, but 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 4471.00 per ton, an increase of 315.8 percent over the average export price of 1998.99 per ton. Recently, the government has levied 15 percent regulatory duty on export of molasses.