Oil PSUs sign long-term purchase agreement for upcoming dedicated ethanol plants
16 May 2022
State-run oil marketing companies (OMCs) - Bharat Petroleum Corporation Limited (BPCL), Indian Oil Corporation Ltd (IOCL) and Hindustan Petroleum Corporation Limited (HPCL) have entered into a long-term purchase agreement (LTPA) for upcoming dedicated ethanol plants across India. The first set of Tripartite-cum-Escrow Agreement (TPA) was signed among OMCs, project proponents and banks on Wednesday.
State Bank of India, Indian Overseas Bank and Indian Bank are three banks that are involved in this tripartite agreement with OMCs and project proponents. The agreement is designed to ensure that payment received by ethanol plants is utilised for servicing the finance extended by these banks.
As per the agreement, ethanol produced by these dedicated ethanol plants will be sold to OMCs for blending with petrol as per Government of India’s Ethanol Blended Petrol (EBP) Programme. Payment towards supply of ethanol shall be credited to escrow account maintained with the financing bank to ensure servicing of loan as per schedule.
TPAs were signed with Micromax Biofuels Pvt Ltd, Eastern India Biofuels Pvt Ltd, and Muzaffarpur Biofuels Pvt Ltd, all of Bihar and K P Biofuels Pvt Ltd and Visag Biofuels Private Limited of Madhya Pradesh.
In Ethanol Supply Year 2021-22, India achieved 9.90 per cent ethanol blending, consuming 1.86 billion litres of ethanol, saving over Rs9,000 crore of foreign exchange. However, the government has advanced the target of achieving 20 per cent blended ethanol by 2025, which is commonly known as E20 target. The major challenge is the deficit of ethanol to achieve this target.
As per E20 scenario, the country requires 10.16 billion litres of ethanol to achieve the target in 2025-26. But, there is a deficit of approximately 6.50 billion litres of ethanol as per the current availability. These five projects are likely to contribute to around 230 million litres of ethanol per annum.
Ethanol blended petrol not only give us cleaner environment as it produces 38 per cent lesser carbon dioxide emission, as well as support rural economy with investment in rural areas and employment generation.