Oil companies and foreign sugar

Three state-owned oil marketing companies (BPCL, HPCL, IndianOIL) will jointly pump in $600 million, or Rs 2,400 crore, in Brazil to buy/lease plantations and related units for producing ethanol, a byproduct of the sugarcane industry blended with petrol to make "gasohol”.

TOI

Oil fields and coal mines are passe. India is now poised to make its first overseas acquisition of sugarcane acreage in search of altenate fuel energy security.

Ethanol is considered less-polluting than petrol and its progressive use is seen as reducing dependence on oil imports.


Brazil is the world’s biggest sugarcane grower and leads in gasohol usage with upto 25 per cent blending. India, with its inadequate ethanol supplies, has been doddering with efforts to introduce 5 per cent blending as opposition from sugarcane lobby and alcohol industry have blocked efforts to raise supply.

A team of executives from Bharat Petroleum, Hindustan Petroleum and IndianOil has initialled documents for working out deals to acquire 15-35 per cent stake in two of the largest ethanol players in the Brazilian sugarcane industry— Louis Dreyfus Commodities Bioenergia and Infinity — and 50 per cent equity in new plantations/projects of smaller firm Rezek.

Indian oil firms will form a joint venture company for ethanol investments and share half of the equity in it. The remaining half ownership will be offered to the Brazilian partners. Most of the investment will be equity contribution from the Indian oil companies as local debt is not available for financing acquisitions in Brazil. The joint venture will be based in Brazil for tax benefits.

Brazil allows foreign ownership of sugarcane acreages which are rain-fed and require little irrigation. The plantations are mechanised with integrated sugar mills.

Several European firms have acquired acreages and taken up ethanol manufacturing for captive use in their home country.

One way of making sugar useful...even if it is foreign sugar!