Govt links ethanol export to in-house use of molasses

ISLAMABAD: The Economic Coordination Committee (ECC) of cabinet on Monday bound ethanol manufacturers to directly purchase its raw material from sugar mills or use the in-house by-product for the biofuel production.

The decision was taken during a Economic Coordination Committee (ECC) meeting presided over by the Finance Minister Asad Umar. The meeting approved the proposal of the ministry of commerce to amend the export policy order 2016 to make it mandatory for ethanol producers to use in-house supply or stocks of sugar mills.

“The export of ethanol and other products manufactured from cane molasses shall be subject to the condition that cane molasses used in production of ethanol and other products manufactured from cane molasses being exported is either produced in-house by the exporter or purchased directly from a sugar mill,” the finance minister said in a statement.

Pakistan is the one of the largest ethanol producers in the world, while alone molasses, a viscous product produced in sugarcane refining, fetched the government around $20 million in exports revenue during the last fiscal year of 2017/18, up an impressive 66 percent over the previous fiscal year.

The ECC further decided that proper recording of production and sale of molasses, can be used as an indicator to gauge the production of sugar, thus assisting the tax authorities in collection of due taxes.

The ECC was informed that FBR and sugar manufacturers had already carried out due consultation on the proposal.

The FBR said cane molasses is a major by-product of sugar industry.

“It is either exported by sugar industry or sold locally or consumed in-house for producing ethanol, more than 95 percent of which is exported,” a document quoted the FBR’s proposal as stating.

“Though export of ethanol is accounted for, the sale and purchase of cane molasses is not fully documented.”

The FBR further said if the production and sale of the molasses is properly recorded, it can be used as an indicator to measure the sugar production.

Sugarcane crushing is usually delayed every year due to difference between the government and sugar mills over the support price. Alone six out of 38 sugar mills commenced operation early last week, at least over a month delay than the appropriate schedule.

A United State Department of Agriculture, however, projected sugarcane production at 72 million tons that is enough to produce around five billion litres of ethanol. Compared to sugar, ethanol exports could earn the government relatively high revenue. Sugar export price was estimated at $0.3/kilogram as against over one dollar for ethanol/litre in the international market.