The Cabinet meeting on December 21 approved the ‘Order 2082 on the Use of Ethanol Blending in Petrol’ to reduce petrol imports. However, even after a month and a half, it has not been published in the Gazette.

The government has not yet taken any steps in the management of raw materials. Although the Order 2082 on blending ethanol in petrol was approved, further process regarding the price, quality and standards of ethanol has not been able to proceed as it has not been published in the Gazette. However, Minister for Industry, Commerce and Supplies Anil Sinha said that the order has reached the stage of being published in the Gazette. 

A sugar factory can produce 20,000 to 30,000 liters of ethanol per day, said Shashikant Agrawal, President of the Nepal Sugar Industry Association. In an interaction titled 'Ethanol Blending Policy in Nepal: Opportunities, Challenges and Implementation Strategies' organized by the Society of Nepal Economic Journalists (SEJON) on Sunday, Agrawal said that up to 360,000 liters of ethanol can be produced per day from 12 industries. 

He said that a large amount of sugarcane is also required for molasses, the raw material required for ethanol. "About 3 percent of the total petrol import volume can be obtained from the domestic sugar industry," Agrawal said. "Ethanol can also be produced from corn, yams and other food grains. Ethanol can be produced in the off-season by collecting corn, yams, grains and other plant-based resources from the plant to be established by the sugar industry with additional investment."

He clarified that he did not have data on the daily quantity of ethanol required for Nepal. "What percentage of ethanol purity is required, how much quantity does the state require per day, at what rate will the state take in the off-season and on-season, what will be the pricing and payment process and modality? Until the working procedures that pave the way for these various issues are prepared and implemented, there is no way for industrialists to immediately invest more and start producing ethanol," Agrawal said. He said that molasses is being produced in excess of what is consumed in the grain and alcohol industries. 

Agarwal said that some sugar factories in Nepal have installed plants with distillery tanks to make alcohol from molasses. Ethanol is prepared after the second stage of processing from the distillery. ‘There is no problem in producing ethanol from factories that have the facility of a distillery plant,’ Agarwal said, ‘But industries that do not have the facility of a distillery plant cannot produce ethanol immediately.’ Agarwal said that an additional investment of Rs 250 million is required to produce 99.5 percent pure ethanol through a distillery plant.

Agarwal said that an investment of Rs 500 million is required to install a distillery plant in industries that do not have a distillery plant in sugar factories and Rs 250 million to produce ethanol from molasses, which is 75 crore. 

Point No. 30 of the government’s 2071/72 policy and program states that the method of blending ethanol with petroleum products will be adopted. The government is emphasizing that the use of ethanol blend will reduce the import of petrol as ethanol is produced domestically, which will help reduce the trade deficit and foreign exchange reserves. In addition, Nepal Oil Corporation Managing Director Chandika Bhatta says that using ethanol blended petrol will reduce pollution by 45 percent. Sinha said that after blending 10 percent ethanol in petrol, 130 million liters of petrol will be replaced annually and 6 billion rupees will be saved for that. In the 7 months of the current fiscal year alone, petroleum products worth 180.74 billion rupees have been imported. During the same period, foodgrains worth 35.62 billion rupees have been imported. However, he also said that there is a challenge in the efficiency of vehicles and food security in the case of ethanol blend. Since foodgrains also have to be imported, stakeholders have also raised questions about the possibility of an increase in foodgrain imports as raw materials for ethanol in the future or the increase in the use of raw materials required for ethanol on productive land. Keeping food security in mind, there is a policy not to allow food products to be used in ethanol production and it will be strictly monitored, said Govinda Prasad Karki, Secretary of the Office of the Prime Minister and Council of Ministers. 

In the ‘Order 2082 on the use of ethanol in petrol’, we have made arrangements that grains used as food cannot be used as raw materials for ethanol, the produced ethanol should be sold only to the Ethanol Corporation and should be produced in an environmentally friendly manner,’ Bhatta said, ‘Agricultural land can be used for the production of raw materials for ethanol, this is also a challenge for us.’

Although it can provide a fair price to sugarcane farmers and create employment, Madhav Timalsina, Chairman of the Consumer Rights Forum, said that the policy should be formulated keeping the rights of the entire consumer in mind. ‘There should be no compromise on the quality of fuel after ethanol blending,’ he said, ‘What is the mechanism to maintain purity of more than 99.5 percent and monitor it? How does it affect the mileage of the vehicle? Consumers should get clear answers to these questions.’

Despite being ready to invest in ethanol production, the project has not progressed for years due to bureaucratic delay and non-cooperation, complained Ved Prasad Kharel, chairman of Kian Chemical Industries Private Limited. ‘We have been working for years with a plan to invest Rs 12 billion, provide employment to thousands and make farmers self-reliant. But for one decision, seven commissions were formed, and the file went around ministries and departments,’ Kharel said. ‘The problem is not at the political level, but in the way the bureaucracy works.’

Bhatta says that since the ethanol blending policy has been implemented even in petroleum-producing countries, its need is even greater in an import-dependent country like Nepal. Although India has been moving forward with 1.5 percent ethanol blending since 2014, it has reached 20 percent by 2025. 

Secretary Karki clarified that this government decision has accelerated the work that has not been progressing for decades and that the government has taken this policy forward because of its many positive aspects.