SUGAR INDUSTRY TO HELP OVERCOME ENERGY CRISIS

E-10 SHOULD BE MADE AVAILABLE AT ATTRACTIVE PRICE FOR THE BENEFIT OF MOTORCYCLISTS

SHABBIR H. KAZMI
(feedback@pgeconomist.com)
Nov 29 - Dec 5, 20
10

Historically, sugar industry has been called the driving engine of rural economy. In Pakistan's present context it can play the role of savior of the economy by contributing low cost electricity and ethyl alcohol for producing E-10. However, policy planners have failed in exploiting both the potential.

Pakistan faces two major problems1) rising oil import bill and 2) high electricity generation cost. Providing the right incentives to sugarcane growers and millers can help in overcoming both the problems and the added advantage will be availability of low cost sugar.

Oil import bill can be contained by using E-10 (motor gasoline blended with 10 percent ethylene). This is in no way an attempt to reinvent the wheel. E-10 is commonly used in many countries. This concept is based on switching to renewable energy products from fossil oil. The switchover is driven by rising crude oil prices, currently hovering around US$85/barrel. Crude oil prices have surpassed US$147/barrel in the recent past, when world witnessed extraordinary hike in commodity prices.

Lately, retail price of sugar surpassed Rs100/kilogram. Though, the shortfall was not significant, to the tune of half a million tonnes, but mishandling the situation caused the worst crisis. The situation can best be described as the outcome of acute shortage of sugarcane. As against an installed capacity to produce 9 million tonnes sugar, production has hovered around 3.5 million tonnes. The natural outcome has been high cost of production. In 2007-08 the country succeeded in producing over 4.7 million tonnes refined sugar. Over the years, the production should have increased but the data shows the opposite. It must be remembered that E-10 cannot be produced is large quantity unless sugarcane availability is enhanced. Experts are of the view that sugarcane production in the country can be doubled without bringing additional area under sugarcane cultivation.

SUGAR PRODUCTION (MILLION TONNES)

YEAR SUGARCANE CRUSHED SUGAR PRODUCED
2004-05 32.101 2.922
2005-06 30.090 2.588
2006-07 4O.468 3.515
2007-08 52.776 4.740
2008-09 33.139 3.135

Sugar production numbers clearly indicate that during 2007-08 the industry got a bumper sugarcane crop of 52.776 tonnes enabling the industry to achieve record sugar production of 4.740 million tonnes and export of 0.260 million tonnes sugar. Over the last two years, production has fallen short of demand necessitating import of sugar, utilising huge foreign exchange.

One of the reasons for lower production of ethyl alcohol in the country is huge export of molasses, maybe because of its very attractive international prices. There is no realisation that producing ethyl alcohol and then E-10 is huge value-addition. However, industry experts say that handling of molasses is far easier than ethyl alcohol and also saves processing cost and therefore they are more inclined to export it. If there is local demand of ethyl alcohol and price is also attractive they should be keen in undertaking production of ethyl alcohol. They also say that despite government showing keen interest in popularising E-10, little has been the success. They attribute this failure to resistance of oil marketing companies, which are hesitant in handling E-10.

The data indicates some facts. In 2004-05, the country produces 1.497 million tonnes molasses out of this 1.151 million tonnes were exported. As against this when molasses production was record high of 2.663 million tonnes in 2007-08 only 0.780 million tonnes quantity was exported. This clearly indicates that domestic utilisation of molasses depends on its international prices as well as domestic demand for ethyl alcohol.

MOLASSES PRODUCTION AND EXPORT (MILLION TONNES)

YEAR PRODUCED EXPORTED
2004-05 1.497 1.151
2005-06 1.437 0.497
2006-07 1.911 0.373
2007-08 2.663 0.780
2008-09 1.535 0.936

However, the data about ethyl alcohol production creates a lot of confusion. In 2005-06 molasses production was 1.437 million tonnes and out of these 0.497 tonnes was exported and ethyl alcohol production was over 82 million liters. As against this in 2007-08 sugar mills produced 2.663 million tonnes molasses, exported 0.780 million tonnes only but 28.6 million litres ethyl alcohol was produced. Industry experts say that since the country has ample molasses storage facilities there has never been any pressure to export molasses under stress.

ETHYL ALCOHOL EXPORT (MILLION LITRES)

YEAR PRODUCED
2004-05 36.669
2005-06 82.135
2006-07 34.116
2007-08 28.609
2008-09 27.045

Industry experts also say that the country has ample ethyl alcohol production capacity, as the peak production achieved in 2006-07 was 82 million litres. Therefore, operating the distilleries at lower capacity utilisation is waste of precious national resources. The mills have the capacity and now it is up to the government to exploit it. E-10 project has not taken off partly because of the resistance of oil marketing companies and partly because of CNG being made available at comparatively lower price.

While one just cannot suggest raising CNG price or closing down the outlets, ensuring availability of E-10 at attractive price can provide an option to the motorist. Experts say that at present bulk of the motor gasoline is used by motorcyclists and sale of E-10 at lower price can help the poor segment of the society.