New Delhi: India’s state-run explorer Oil and Natural Gas Corp. Ltd (ONGC) and Finland’s Chempolis Ltd, a green technology specialist, on Tuesday signed a preliminary collaboratory pact for the production of the bio-fuel ethanol, officials of both sides said.

The in-principle agreement was signed in the presence of visiting Finnish minister for European affairs Alexander Stubb and India’s minister of state for petroleum and natural gas Panabaka Lakshmi in New Delhi.

ONGC chairman and managing director Sudhir Vasudeva said the memorandum of understanding (MoU) would give ONGC access to technology for the conversion of cellulose into ethanol.

“They (Finns) have developed the technology by which cellulose-based waste products like wheat straw can be converted into ethanol. Knowing that nearly 75% of our (fuel) consumption is met through imports, we have large requirement of ethanol and it is not being met by indigenous production since ethanol is going into alcohol production," Vasudeva said.

With India heavily reliant on imports of oil, the collaboration could yield a possible solution to the country’s quest for energy security, Vasudeva said.

“It (the collaboration) certainly helps in whatever modest way possible. Our (fuel) requirement is increasing very fast, we are producing only 40 million tonnes (of oil) and we are importing 140 million tonnes, so whatever can be done by adding this" would be welcome, he said.

“... Indian companies already have a long tradition to utilize residual biomass from agriculture, especially combustion of sugarcane bagasse and production of electricity... Indian agriculture produces huge volumes of residues that are largely not utilized," Pasi Rousu, president, Asia-Pacific and Americas, at Chempolis, said in a statement posted on the company’s website.

“In cooperation with ONGC, Chempolis would be looking forward to the establishment of biorefineries preferably in areas of Uttar Pradesh, Punjab, Haryana, Maharashtra, Karnataka and Gujarat. The company aims at delivering its technology in cooperation with leading Indian industry suppliers," Rousu said.

According to Vasudeva, the pact will have other spin-offs—in the area of clean environment. At present, wheat straw, seen as the major raw material for ethanol, is being burnt and not put to any productive use, he said. “We are wasting energy, we are polluting the atmosphere, so it will help in all that," Vasudeva added.

India is also looking to Finnish technology in the area of converting solar energy into thermal energy to be used for heating purposes, the ONGC chief said.

As part of the government’s efforts to reduce the country’s dependence on hydrocarbons, oil marketing companies (OMCs) were required to mandatorily sell petrol blended with 5% ethanol from 1 July. But this got delayed and in August oil minister M. Veerappa Moily told Parliament that OMCs would aim to sell 5% ethanol-blended petrol by October in areas where it is available. “The domestic availability of ethanol is also inadequate," Moily said in a statement issued by the government.

Against a requirement for 1.4 billion litres of ethanol in December, producers offered OMCs 550 million litres of ethanol and of this, OMCs decided to procure 400 million litres.

“As on 3 August, the OMCs have issued 218 letters of intent for 32.72 crore (327.2 million) litres and 199 purchase orders have been placed for 29.42 crore litres, out of which 2.30 crore litres of ethanol has been received by the OMCs," the government said in the statement.

In its notification in January, the government had said that by 2017 every litre of petrol should be blended with 20% of ethanol. The initiative is part of the national biofuel policy announced in December 2009.

Kirthi V. Rao contributed to this story.