RIL, Tata, Bharti eye Bihar sugar mills

Reliance Industries, Tata Chemicals, Bharti Enterprises' Fieldfresh and Indian Oil are among several large companies that have evinced interest in leasing closed sugar mills that the Bihar government is offering, mainly to exploit opportunities to make ethanol to meet mandatory petrol blending norms that were introduced this year.

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

Other companies that have acquired the request for qualification (RFQ) forms are public sector Bharat Petroleum and Hindustan Petroleum, and Renuka Sugars, Upper Ganges Sugar, Dhampur Sugar and India Glycols.

A pre-bid meeting is scheduled on December 8 in New Delhi.

"All bids need to be submitted by the 20th of this month," said state Cane Development Minister Nitish Mishra, adding that lessors will be shortlisted on December 29.

Confirming the purchase of RFQ forms, Reliance, Tata Chemicals and Indian Oil said they will consider making investments in ethanol production if things go well.

"We are interested in buying mills to set up ethanol-producing units but nothing has been finalised. We have been studying the possibility of industrial activity related to agriculture in Bihar," said an official of Reliance Industries, India's largest private oil refiner.

Officials in government-owned IOC, the country's largest refiner, also confirmed that it intends to make ethanol.

Fieldfresh confirmed an RFQ purchase but said it is too early to discuss the company's plans.

The central government recently made 5 per cent blending of ethanol in petrol mandatory. This will increase to 10 per cent from October 2008.

Bihar has 252,000 hectares under sugarcane cultivation and produces 14.4 million tonnes of sugarcane.

The cane area accounts for 4.5 per cent of the state's cultivable area of 5.5 million hectares and there is scope to increase it by bringing more area under sugarcane.

To attract investment in sugarcane-based industries, the state government amended the Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981, earlier this year, allowing sugarcane juice to be directly used to produce ethanol or rectified spirit and for co-generation of power.

Of the 15 mills, eight have been reserved for sugarcane-based industries such as sugar mills or distilleries for ethanol or alcohol production. The remaining seven can be used for industries that may not be sugarcane-based.

The floor price of these mills, mostly based in north Bihar, has been fixed at between Rs 8 crore (Rs 80 million) and Rs 70 crore (Rs 700 million).

For sugarcane-based industries,the state is offering a capital subsidy of 10 per cent of the investment, subject to a Rs 10 crore (Rs 100 million) ceiling.

Closed for more than a decade, these mills together have a financial liability of Rs 700 crore (Rs 7 billion) under various heads and the funds raised by leasing them will be used to clear the liabilities.

"We intend to transfer the assets of these mills without any liability," Mishra said.