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Government-owned oil marketing companies (OMCs), BPCL, Indian Oil Corp, and HPCL on Wednesday entered into a long-term purchase agreement (LTPA) for upcoming dedicated ethanol plants across India. Additionally, major public sector banks along with other renowned companies are also part of Tripartite-cum-Escrow Agreement (TPA).

As per the Ministry of Petroleum & Natural Gas' statement, the first set of Tripartite-cum-Escrow Agreement (TPA) was signed among OMCs, project proponents, and Banks of the respective ethanol plant projects in 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.

Three public sector banks namely SBI, Indian Overseas Bank, and Indian Bank are involved in this tripartite agreement with OMCs and project proponents.

In a statement, the ministry highlighted that the agreement is designed to ensure that payment received by Ethanol plants is utilized for servicing the finance extended by these Banks.

Under the agreement, ethanol produced by these dedicated ethanol plants shall be sold to OMCs for blending with Petrol as per Govt of India’s Ethanol Blended Petrol (EBP) Program. Payment towards the supply of ethanol shall be credited to the escrow account maintained with the financing bank to ensure servicing of the loan as per schedule.

Also, TPAs have been signed with Micromax Biofuels Pvt Ltd, Bihar, Eastern India Biofuels Pvt Ltd, Bihar, Muzaffarpur Biofuels Pvt Ltd, Bihar, K P Biofuels Pvt. Ltd, Madhya Pradesh, and Visag Biofuels Private Limited, Madhya Pradesh.

India clocked 9.90% ethanol blending, consuming 186 crore litre of ethanol, and saved over 9,000 crore of foreign exchange in the Ethanol Supply Year 2021-22.

However, the Indian government has advanced the target of achieving 20% blended ethanol by 2025, which is commonly known as the E20 target.

According to the ministry, the major challenge is the deficit of ethanol to achieve this target. As per the E20 scenario, the country requires 1,016 crore litre of ethanol to achieve the target in 2025-26. But, there is a deficit of approximately 650 crore of ethanol as per the current availability.

"These five projects are likely to contribute to around 23 crore litres of ethanol per annum," the ministry said.

Notably, ethanol-blended petrol not only gives a cleaner environment as it produces 38 % lesser carbon dioxide emission, as well as, supports the rural economy with investment in rural areas and employment generation.

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