24-12-08 Indian state-run oil marketing firms have deferred nearly $ 600 mm plans to buy sugarcane acreages in Brazil on account of their poor financial health, global liquidity crunch and decline in international crude prices that have made blending of motor fuels with ethanol, a by-product of sugar industry, uneconomical. About two years back, plans of state-owned oil marketing firms -- led by Bharat Petroleum -- were said to acquire sugarcane farms to ensure cost-effective supplies of ethanol for the government's motor fuel blending programme.
"... in view of economic slowdown and resource crunch, the companies are not contemplating any investment in Brazil to set up an ethanol project," junior oil minister Dinsha Patel told Parliament.

The plan envisaged acquiring or long-leasing sugarcane farms in Brazil with designated mills for producing ethanol. The ethanol was to be brought to India for 5 % blending with petrol. The acquisitions were to be made in joint venture with Brazilian partners. The firms had conducted feasibility studies and found the project "feasible and strategic" for Indian oil industry, the minister said.
IOC, BPCL and HPCL were working on deals to acquire 15-35 % stake in two of the largest Brazilian integrated ethanol players -- Louis Dreyfus Commodities Bioenergia and Infinity -- and 50 % stake in new plantations/projects of a smaller firm Rezek. The Indian oil firms were to form a joint venture company for ethanol investments and share half of the equity in it. The remaining half ownership was to be offered to the Brazilian partners.

Brazil is the world's biggest sugarcane grower and allows foreign ownership of sugarcane acreages which are rain-fed and require little irrigation. Operations in the plantations are highly mechanised with integrated sugar mills. Several European firms have acquired acreages and taken up ethanol manufacturing for captive use back home.
India has been pushing for doping 10 % ethanol in petrol once enough quantities are available to double this blending. Patel said the estimated surplus quantity of alcohol after setting aside for industrial and potable use, which could be made available for ethanol blended petrol programme, was 82.3 crore litre during 2008-09.