Ethanol companies ripping off Malawians

I write to express my concern on behalf of my fellow Malawians on the issue of ethanol/petrol blending, the resultant reduction in the mileage of the car versus the pump price of the blend.

I recall ethanol to Petrol Blending has never been mandatory until recently when the Ethanol producing companies vehemently lobbied to have the blending mandatory, because it profits them heavily to sell their ethanol locally than to sell it on export market.

I have no problem with making blending mandatory, moreover it’s better to utilize our own resources than keep struggling to source Petrol with our limited forex reserves.

My expectation is that while the blending is mandatory and good for our economy, it must benefit the citizens in Malawi. Anything mandatory (Imposed on consumers) is supposed to be regulated to avoid the producing companies abusing the consumer. In our current situation the mandatory blending is devastating the consumer pocket than benefiting him.

Petrol expensive

By all means you will agree with me than a blend (ethanol and petrol combined), will cover less mileage for the car than pure Petrol. What this means is that if a car is designed to cover 10km on a litre of petrol, the blend will make it cover about 7km on a litre. This is also confirmed in the article of  The Nation 6th September 2012, where the national Commission for science states that ‘vehicles running on Petrol cover longer distance than vehicles running on ethanol.

If our vehicles were Flexi, this would be compensated by lower servicing cost. But our vehicles are not flex, which means that if you introduce ethanol in Petrol you cover less distance per litre and suffer the same servicing charge. Malawians can agree with me that today’s Petrol (blend) does not last in their car tanks. Its because of the mandatory 20% blend.

My expectation is that the less mileage per litre of the blend must be compensated by reduced pump price per litre. But the contrary is true. The blend is sold at the would be price of pure petrol. This means that the consumer donates free money to ethanol producing companies.

What buffles me is the pricing of ethanol from the ethanol companies which are subsidiaries of Press Corporation Ltd.

Ethanol is sold to Petroleum trading companies such as Puma,Total etc at MK5 less the rulling wholesale Petrol price. The K5 is meant to benefit the petrol company to blend. This K5 is not passed on to the pump price, rather it is a saving the Petrol company gets for every litre of ethanol sold.

On the other hand – Ethanol producing companies raise the price of ethanol every time Petrol price goes up. They always make it K5 less the rulling price. Their operations costs are next to nothing, generally averaging MK45 per litre. this means that now as Petrol pump price is 539 in which case pump price is likely yo be around 530, ethanol will be hiked to 525 as a selling price to Petroleum companies (the K5 less is a benefit to petroleum companies). This means that what goes on the bottom line of ethanol companies is 525-40=385 (operations cost minus selling price) – free money indeed paid by the motorist. On the other side petroleum commpanies pocket the K5 as a bribe, disguised as a motivator to blend. (what motivator if blending is mandatory).

No wonder, if you check Press Corporation accounts released on Wednesday, the financial statements commentary states that results of most of its companies shrunk while the results of ethanol companies thrived.

These ethanol companies must be regulated. The ethanol must be sold at a price reflection the cost of production. otherwise remove the Mandatory blending thing. We consumers are bleeding in this economic turbulence, don’t make us bleed even more because of selfishness of some companies and individuals.

in Brazil where ethanol usage as fuel is advanced than any other country in the world, consumers are given a choice between buying pure petrol, a blend or pure ethanol (not mandatory), at the same time the price of ethanol is next to nothing. Apart from this, almost all cars are flexi (converted to use ethanol pure or a blend or petrol pure), this means that efficiencies when running on ethanol are high.

I would like to appeal to appeal to the National commission of Science and technology – which is well funded in all experiments on ethanol by ethanol producing companies (PressCane and ETHCO). To reverve personal interests and reveal the truth behind current status of things, apart from their flexi vehicle project.

MERA, wake up and regulate or remove blending all together, or buy ethanol from outside the country it is one quarter the price of ethanol from local companies.

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