KARACHI, Aug 26: Export of ethanol to European Union (EU) countries has come to a total halt on withdrawal of exemption allowed under the GSP (Generalized System of Preferences). As a result of this a levy at $190 per ton has been imposed on import of Pakistani ethanol alcohol to Europe.
After 9/11, the EU, under the GSP, had allowed tariff concessions on imports from Pakistan. However, for ethanol, these exemptions were to last up to December 31, 2005, but were abruptly withdrawn last month resulting into total halt to exports.
Further, on the complaint of French distilleries, the EU, besides withdrawing exemption allowed under GSP on imports of ethanol from Pakistan, had also initiated investigations into the dumping factor.
Under the GSP rules any country whose exports exceeds one per cent of EU’s member states total imports is graduated up on which concession and exemption allowed are immediately withdrawn. Presently, Pakistan’s total exports to EU states are little over one per cent.
According to industry sources, up to July 2, 2005, Pakistan exported around 1.02 million tons of ethanol to the EU member states at an average price of $550 per ton. But thereafter there had been no export of ethanol from Pakistan to EU member states.
Sources further said that out of seven operative distilleries having production capacity of 890,000 litres per day, two have already closed their operations in the absence of any export contracts while the rest have slowed down their production. Similarly, another five new distilleries having a total production capacity of 575,000 litres a day did not go for production under the prevailing circumstance.
The European Commission (EC), the sources said, did not only initiate investigation against Pakistani distilleries but had also approached other countries including Guatemala where three to four companies had been selected for investigation, and five European distilleries. The three Pakistani distilleries, sources said, had received a questionnaire comprising over 70 to 80 pages to be answered and filled.
The main objective of investigation is to find out at what price the distilleries have sold their product in their respective local markets against the prices they quoted and sold to EU member states. By doing so they could find that if any material injury had been caused to the European industry or not.
Since there is negligible domestic consumption of ethanol alcohol, Pakistan have a strong case against any anti-dumping move from the EU. Over 95 per cent of entire production is exported and only around 5 per cent is used locally.
Presently the distilleries are confronted with high cost of production as the prices of molasses have gone very high. There was a time when molasses was exported at an average price of around $40 per ton. But after the installation of distilleries there was a leap jump and it have gone up to $96 per tone at one point and have now settled down at around $85 per ton.
The country produced around 1.496 million tons during 2004-05 and after adding held-over stocks of previous year (2003-04) total available stocks of molasses rose to 1.645 million tons. Around 0.450 million tons of molasses had been exported so far while 0.510 million tons have been converted into ethanol alcohol.
However, a sizable quantity of 0.536 million tons of molasses was still lying with distilleries who are reluctant to convert it to alcohol as they could not even cover the cost because of the EU’s levy of $190 per ton on the withdrawal of GSP concessions, a leading exporter Tariq Zada told Dawn.
