Leading Oil PSUs Sign a Tripartite-Cum-Escrow Agreement for Upcoming Dedicated Ethanol Plants

Bharat Petroleum Corporation Limited (BPCL), Indian Oil Corporation Ltd (IOCL), and Hindustan Petroleum Corporation Limited (HPCL) have signed a long-term purchase agreement (LTPA) for upcoming dedicated ethanol plants across India.

In the presence of Sandeep Poundrik (IAS), Principal Secretary, Department of Industries, Govt. of Bihar, Ashwani Bhatia, MD State Bank of India, and Sukhmal Jain, Executive Director I/C, Marketing Corporate, BPCL, the first set of Tripartite-cum-Escrow Agreements (TPA) were signed among OMCs, project proponents, and Banks of the respective ethanol plant projects.

Three banks are involved in this tripartite agreement with OMCs and project proponents: State Bank of India, Indian Overseas Bank, and Indian Bank. The agreement is intended to ensure that payments received by ethanol plants are used to service the loans made by these banks.

The agreement states that the ethanol produced by these dedicated ethanol plants will be sold to OMCs for blending with Petrol under the Government of India's Ethanol Blended Petrol (EBP) Program. Payment for ethanol supply shall be credited to an escrow account maintained with the financing bank to ensure timely loan servicing.

TPAs were signed with Bihar's Micromax Biofuels Pvt Ltd, Eastern India Biofuels Pvt Ltd, Muzaffarpur Biofuels Pvt Ltd, and K P Biofuels Pvt Ltd., Madhya Pradesh and Visag Biofuels Private Limited, Madhya Pradesh.

In the Ethanol Supply Year 2021-22, India achieved 9.90% ethanol blending, consuming 186 million litres of ethanol and saving over $9000 million in foreign exchange. However, the government has advanced the target of achieving 20% blended ethanol by 2025, also known as the E20 target.

The main challenge in meeting this target is a lack of ethanol. According to the E20 scenario, the country will need 1,016 crore litres of ethanol to meet the target in 2025-26. However, based on current availability, there is a 650 crores ethanol deficit.

These five projects are expected to contribute approximately 23 million litres of ethanol per year. Ethanol-blend gasoline not only helps the environment by emitting 38% less CO2, but it also helps the rural economy by encouraging investment in rural areas and job creation.