Indian Oil Corp to invest Rs 8 bn in a greenfield ethanol plant in UP

A logo of Indian Oil | Photo: Reuters
Public sector oil marketing behemoth Indian Oil Corporation (IOC) will invest close to Rs 8 billion in a greenfield ethanol plant in Gorakhpur district of Uttar Pradesh.

Interestingly, Gorakhpur is the pocket borough of chief minister Yogi Adityanath. The state cabinet yesterday approved the proposal to give 50 acres of the defunct Dhuriapar cooperative mill in Gorakhpur on 30 years lease to IOC for setting up the ethanol unit. The Dhuriapar mill is spread over an area of over 100 acres.

IOC would set up a second generation ethanol plant, which is part of the union petroleum ministry’s larger roadmap of gradually ramping up sugarcane-extracted ethanol value chain for mixing in petrol to slash oil import bill and at the same time ensure remunerative prices to farmers. Similar plants have been proposed in other states as well.

Second generation ethanol units employ new technology to produce biofuels from agricultural residue, such as sugarcane byproducts for mixing in petrol. In comparison, first generation plants extract biofuels directly from sugar and vegetable oils by employing conventional technology.

Earlier, UP cane commissioner Sanjay Bhoosreddy had told Business Standard the state favoured constituting a joint venture (JV) between IOC and the sugar federation for the proposed second generation ethanol plant. However, since the proposal involved the transfer of land on lease, it required the state cabinet nod, which has now been accorded.

Over the past few months, IOC and sugar department officials had been holding parleys on the matter. In fact, the proposal was also discussed during the visit of petroleum minister Dharmendra Pradhan here in June 2018, while Adityanath was also keen on the speedier fructification of the prestigious project.

Under the terms of agreement, IOC would pay Rs 13 million annually to the sugar federation as lease rent. The state government is confident that the project would not only boost the socio-economic development in the region, but also spur multiplier effect on direct and indirect job creation.

On the expiry of the 30-year lease, IOC would hand over the project/plant to the sugar federation on ‘as is, where is’ basis without any debt/payout liability.

Owing to a sugar market glut and fall in retail prices, the central and UP governments have long been exploring various options to insulate farmers from seasonal fluctuations by diversifying the sugar sector and promoting allied industries, including ethanol production.

Recently, Adityanath had announced that the state would support the private sector in foraying into ethanol production. The Centre also wants to further liberalise ethanol value chain for doping in petrol for cutting the oil import bill and dealing with the sugar glut. Currently, there is a provision of ethanol blending up to 10% in petrol, which the Centre wants to harness optimally to help farmers and cool retail petrol prices.

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