Mera engages KPMG on ethanol pricing
The Malawi Energy Regulatory Authority (Mera) has engaged a tax, audit and business advisory firm, KPMG, on ethanol pricing to determine the ideal price for the product which is convenient for consumers and producers.
Plans to roll out the Ethanol Driven Vehicle Project (EDVP) have been on a standstill awaiting a nod from Ministry of Finance, Economic Planning and Development on the pricing model of ethanol fuel the implementing company, Presscane Limited, had earlier submitted to Treasury.
Mera spokesperson Fitina Khonje said in an interview on Monday the study by KPMG, which was commissioned in November and is expected to end early next year, is a milestone in the EDVP which was initiated in 2004.
The project was initiated after a Cabinet directive that Malawi should explore other sources of fuel for vehicles with the overall objective of contributing to economic development by promoting the use of ethanol as an alternative source of fuel.
In April last year, Ethanol Company Limited (EthCo), a subsidiary of Press Corporation Limited (PCL), presented a proposal for the pricing model for ethanol to Ministry of Finance, Economic Planning and Development, a price which was 20 percent lower than that of petrol.
However, Khonje said that the study findings will be discussed with concerned stakeholders and Mera board before developing the new pricing structure.
She said: “Mera engaged the consultant to scrutinise the price and see what is contained in the price so that we can arrive at a price that is affordable for a consumer and also appropriate for producers of ethanol.
“It is not like when they provide us with the findings we are done. We will have to discuss the price with other stakeholders and the board and after approval by the board that is when we can come up with the new pricing structure.”
While confirming of the price study in an interview last week, Presscane Limited general manager Christopher Guta said as a business, they would also want to be assured of positive returns.
“As a business, we cannot go without the benefit of a profit. The intention is to ensure that we deliver a product at the market at a price that makes us stay in business.
“They [consultants] have been coming to our establishments and we have opened our books to them. They want to understand the cost of producing ethanol and perhaps relate the pricing model of ethanol to the cost of production.”
He said at the end of it all, the study will ensure that the decision to be made and passed on consumers is made based on solid information.
Experts argue that using local fuel can positively contribute to fuel price stability, reduce vehicle running costs, reduce foreign exchange requirements and help address challenges faced by the country due to reliance on imported fuel.
In an earlier interview, Puma Energy Limited managing director Davies Langesi described ethanol as a right alternative for petroleum fuel, which he said has a net positive benefit cost impact on the economy and is an ideal route for Malawi to explore.
