ISLAMABAD, Dec 25: The Planning Commission has moved a summary to the cabinet headed by Prime Minister Yousuf Raza Gilani to make necessary arrangements for blending of 10 per cent ethanol in petrol to be sold in the country from late next year.

The new product being labelled as “E-10” has been proposed by the expert committee on blending of ethanol and biofuel technology recently formed by President Asif Ali Zardari and headed by Zaka Ashraf, President of Zarai Taraqiati Bank Ltd (ZTBL).

The committee is of the view that there is no need for any alterations in the existing vehicles in order to make them run on E-10, a blend of 10 per cent ethanol and 90 per cent petrol.

But, it has suggested to the government to make rules and regulations under which between 2010 and 2014 all car assemblers will be required to also start manufacturing vehicles that totally run on E-10.

It has been proposed that the summary should be approved in the next meeting of the cabinet and a joint implementation committee be formed immediately for the project.

The summary states that the Pakistan State Oil (PSO) will start the blending process for the first year.

Later, it would be made mandatory for all the oil marketing companies to market the E-10 for which they will be offered four per cent profit margin.

The commission has also sought the government to ensure that E-10 be sold at 15 to 20 per cent less price than petrol and also cheaper than that of the Compressed Natural Gas (CNG) to encourage its use at mass level. Petrol is now being sold at Rs57.66 a litre and CNG Rs45 a kg.

The Oil and Gas Regulatory Authority (Ogra), which reviews the prices of petroleum products, will also be empowered to fix the prices of E-10.

It has been suggested that there should be no Petroleum Development Levy (PDL) imposed on E-10 and that the new fuel should also be exempted from the sales tax that is around 16 per cent for a period of at least five years.

The government is currently charging around Rs30 per litre PDL on petrol.

Five-year duty exemption on the import of blending equipments has also been sought besides the guaranteed 15 per cent rate of return on investments in the E-10.

During 2007-08, the country produced 2.7 million tons of molasses, while 300,000 tons of ethanol valued $116 million) were exported.

The committee is of the view that the introduction of E-10, in the start with a ratio of 10 per cent blending with petrol and later 50 per cent, will enable the country to reduce its oil import bill that touched $11 billion last year and utilise molasses.

But, as price of crude oil in the international market has dropped to around $40 from $147 a barrel in July this year, oil refineries have criticised the move of the government to introduce E-10.

The oil refineries are presently operating at half of their capacities and if the E-10 discourages the use of petrol, it would inflict heavy financial losses on refineries and would also create diesel shortages.

This is feared to disturb the present energy mix and would have severe repercussions for the country’s heavy transport system including busses, truck and railways that run on diesel.

Some critics from the agriculture sector have also pointed out that the move was against the food security efforts of the government.