Ethanol fuel prices explained
http://www.theindependent.co.zw/
Thursday, 10 May 2012 17:49
GREEN Fuel has dismissed claims by government that it has not furnished it
with the cost structure into its wholesale price of E10.
Senior officials of the company outlined its cost structure at a meeting
between it, the Zimbabwe Energy Regulatory Authority (Zera), and the Inter
Ministerial Pricing Sub Committee in March.
Officials said Green Fuel was not responsible for the pump price of fuel,
which government and other stakeholders would like to see much lower than
the US$1,36 a litre being charged by retailers. The Green Fuel spokesperson
said the company wholesaled its E10 fuel at US$1,00 and this was at 19 cents
discount to what the company ought to charge. The wholesale price was
disclosed to all potential ethanol fuel dealers, including those that
visited Green Fuel’s stand at the recently-ended Zimbabwe International
Trade Fair.
“The current selling price of the ethanol blended fuel is at a discount of
US 19 cents so as to encourage market up-take,” one official said.
However, government still insists it has not received the official costing
structure of theE10 fuel. Government is a 30% stake joint venture partner in
the project through the Agricultural and Rural Development Authority.
Agriculture minister Joseph Made this week reiterated his assertion in an
interview with the ZBC that government is yet to be furnished with the full
pricing structure of E10 fuel. Expectations are that the fuel should be
retailed much cheaper than 100% unleaded fuel. E10 blend is a nine-to-one
blend between unleaded petrol and ethanol.
Although government denies having full knowledge of the E10 pricing
structure, minutes seen by the Independent of a meeting held among the
Zimbabwe Regulatory Authority, the Inter-Ministerial pricing Committee and
Green Fuel on March 14 this year, indicate the pricing structure was
disclosed.
According to the minutes Bianca Rautenbach highlighted that the current
selling price of US$1,00 instead of US$1,19 was implemented to encourage
market up-take despite that some costs, including processing cots had gone
up.
Rautenbach said the processing cost had gone up from US 7 cents to US 13
cents. The processing expense included costs relating to chemicals and
associated inputs for distillery. This was after Zera had enquired if there
was documentation to support the cost structures. Green Fuel highlighted
that cost figures did not take into consideration the inflation factor.
In the meeting, Rautenbach said the total cost for cane production was US$35
million of which 8% needed to be paid to Arda in terms of the
Buy-Operate-Transfer (BOT) agreement.
Rautenbach also said ethanol only makes up 10% of the E10 petrol blend and
this has a limited ability to affect the price.
Green fuel officials say the current US 6 cents saving to the consumer on
purchasing E10 petrol has a large saving to the economy.
The Zimbabwe Regulatory Authority raised the issue of Value Added Tax on
cane but Green Fuels said ethanol was exempt from paying.Green Fuel said the
total of US$12,5 million was set aside for working capital requirements.
Storage and handling fees amounted to US$5,2 million. Green Fuels has to pay
back its US$25 million loan.