Hindustan Petroleum forays into ethanol business

Chennai: The public sector oil company Hindustan Petroleum Corporation has marked its entry into the ethanol business by tying up with Shree Renuka Sugars to set up an integrated sugar mill in Maharashtra.

The two companies informed the stock exchanges that they have signed an agreement to promote a joint venture company for the sugar mill with associated facilities for producing ethanol.

According to a Renuka Sugars’ spokesperson, the proposal, to be finalised in a month, envisages a long-term partnership with the oil company to carry forward the ethanol programme to supply ethanol-blended petrol. The investment in the project by HPCL shows its commitment to the ethanol-blended fuel programme.

Till now the oil companies have depended on calling for a three-year tender to tie up for their requirement of ethanol.

Now HPCL has come in as an assured long-term buyer with a stake in a project. The pricing for the ethanol to be supplied to HPCL would be decided by a tender , the official said.

The joint venture is based on the Brazilian concept of a flexible approach to the production of sugar or ethanol depending on market conditions. While in India, sugar is the main product in a mill and ethanol a by product, the joint venture with HPCL will be capable of producing ethanol as a main product 75 per cent of the output could be either ethanol or sugar as needed.

According to sources in the know, the details of the joint venture and levels of investment by the partners are to be finalised in the coming weeks, but the agreement envisages setting up of a sugar mill with a capacity to crush about 6,000-10,000 tonnes of sugarcane daily, a 30-MW cogeneration plant and a distillery of more than 200 kilolitres a day. Going by industry estimates, a project on this scale would involve investments of over Rs 550 crore.

On the ethanol programme, the officials said that though the Centre has shown a commitment to launch 10 per cent ethanol-blended petrol, even the first phase of 5 per cent blending is yet to take off completely. Ten States have implemented the programme in fits and starts. A partnership of this type would help to take the ethanol programme forward.