Bihar to oppose Centre's notice on ethanol

The government of Bihar has strongly opposed the Centre's notification imposing a rider on ethanol production. The move, it claims, will significantly impact the state's industrialisation.

The Nitish Kumar-led Bihar government, in power for about two years, has made little achievement in industrialisation. The Sugarcane Development Minister Nitish Mishra said he would write to the Union Agriculture and Food Minister Sharad Pawar, asking for an exception to Bihar for ethanol production. "If need arises, our chief minister will intervene to solve the issue," Mishra told Business Standard.

With the carving out of Jharkhand in 2000, Bihar has been left with no significant minerals resources to attract investments in mineral-based industry and is now primarily suited for agro-based industries.

Bihar, with barely 2 per cent of the country's sugar production cannot be compared to a state like Uttar Pradesh or Maharashtra, which individually account for over 30 per cent of the country's total sugar output, said Mishra.

On December 28, the central government issued a notification amending the 1966 Sugarcane Control Order, to enable direct usage of sugarcane juice for ethanol. However, it allowed only sugar mills to undertake direct production of ethanol.

The state had received bids for three of its closed sugar units from companies like Reliance Industries and Hindustan Petroleum Corporation Ltd (HPCL). While Reliance has emerged highest bidder for one unit, HPCL is the highest bidder for the other two units - both plan to produce ethanol in Bihar.

With the Centre's notification, a mill can use sugarcane juice for ethanol production only if it produces sugar. This implies that Reliance and HPCL will have to make sugar in order to produce ethanol. However, Mishra says the state is not going to let these investment opportunities go away.

Last November, the Bihar government decided to offer 15 closed mills belonging to the corporation for a long-term lease of 60 years, extendable by 30 years, on the recommendation of SBI Capital Markets.