IOC to invest Rs. 800-crore in a greenfield ethanol plant in UP

Public sector oil marketing giant, Indian Oil Corporation (IOC), will invest close to Rs. 800-crore in a greenfield ethanol plant in Gorakhpur district of Uttar Pradesh.

The UP cabinet recently 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 bio-fuels from agricultural residue, such as sugarcane by-products for mixing in petrol. In comparison, first generation plants extract biofuels directly from sugar and vegetable oils by employing conventional technology.

Under the terms of agreement, IOC would pay Rs. 13 million annually to the sugar federation as lease rent. 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, the UP government had announced that the state would support the private sector in foraying into ethanol production.