The plant has been proposed in Gorakhpur, the pocket borough of chief minister Yogi Adityanath, who is keenly following up on the project. IOC has sought 50 acres from the defunct Dhuriapar cooperative sugar mill in Gorakhpur for the proposed plant spread over an area of about 100 acres.

The proposal come in the wake of the petroleum ministry seeking to strengthen sugarcane-extracted ethanol value chain for mixing in petrol to cut oil import bill and provide remunerative prices to farmers.

Second generation ethanol plant uses modern technology to produce biofuels from agricultural residues, such as sugarcane byproducts. In comparison, first-generation plants extracted biofuels directly from sugar and vegetable oils by employing conventional technology.

UP cane commissioner Sanjay Bhoosreddy told Business Standard that the state government was in favour of floating a joint venture (JV) company for the proposed ethanol plant between IOC and the UP cooperative sugar mill federation. However, the proposal would need vetting and subsequent approval of the state cabinet, since it involves transfer of land on lease.

The issue was also discussed during the recent Lucknow visit of petroleum minister Dharmendra Pradhan and now the issue is being fast-tracked by the state.

Meanwhile, Bhoosreddy said alternatively a Compressed Natural Gas (CNG) project was also being considered if the ethanol plant proposal did not pass the muster. There is a proposal to produce CNG from press mud, which is a residual matter of the filtration process of sugarcane juice. Press mud can also be used as compost and other organic byproducts.

He said for the CNG plant, the state government would not explore the joint venture route and only contribute with land equity. “In either of the cases, the project would start taking shape by the end of this calendar year.”

Recently, the state government had announced a financial package to revive 6 cooperative sugar mills, which would comprise sugar plant, cogeneration and distillery units for greater economic viability.

Owing to recent sugar sector glut and consequent fall in prices and mounting sugarcane arrears, the central and UP governments have been looking at ways to insulate farmers from seasonal fluctuations by diversifying the sugarcane portfolio and promoting other industries, including ethanol.

Since, UP is the country’s top sugarcane and sugar producer, ethanol production has large untapped potential in the state. Besides, the Centre has been working on a roadmap to rationalise the process of selling ethanol for doping petrol to cut oil bill, cut emissions and dealing with sugar glut. There is a provision of ethanol blending up to 10 per cent in petrol, which the Centre wants to harness to help farmers and cool retail petrol prices.