HPCL to invest Rs 614 cr in sugar mills to produce ethanol

Hindustan Petroleum Corporation Ltd (HPCL) will invest Rs 614 crore in the two sugar mills it had bought in Bihar to manufacture ethanol, which will be blended with petrol.

"The HPCL Board had a few weeks ago approved the investment proposal but due to the General Elections it was not implemented. The board was yesterday informed of the decision to go ahead with the investments," a company official said.

The two plants will produce 60 kilolitres of ethanol per day, to be used to dope petrol.

"We are now tendering for plant equipment and the two units would be operational by 2010-end," he said.

India has mandated blending of ethanol in petrol to cut the country's dependence on imported oil. Currently, 5 per cent ethanol is doped in petrol and the percentage may be doubled in coming years.

HPCL had last year taken the two closed sugar mills from the Bihar government on a 60-year lease for Rs 95 crore.

Bihar had auctioned 15 defunct mills but received bids for 12 units from 29 companies.

The state government rejected bids for seven mills, including one of HPCL, on the grounds of the offer price being lower than the floor rate it had set.

HPCL had bid for three but got two. Reliance Industries bagged one. Delhi-based Rollcon Projects and S S Infrastructure of Darbhanga managed one mill each.

Ethanol produced from the two mills would be enough to meet doping requirements in Bihar and Jharkhand.