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Nearly a year after the government decided to implement a policy mandating ethanol (bioethanol) blending in petroleum products, the basic implementation process remains incomplete.

Although private-sector companies interested in establishing ethanol industries have already submitted their applications, billions of rupees in potential foreign investment have been put on hold because the Nepal Oil Corporation (NOC) has yet to issue Letters of Intent (LOIs).

The government had approved the Ethanol Blending Program through a Cabinet decision and published the policy in the Nepal Gazette. Following the decision, the Ministry of Industry, Commerce and Supplies instructed the Nepal Oil Corporation to initiate the required procedures. NOC subsequently invited applications from industries interested in producing and supplying ethanol, but the process has stalled since then.

So far, eight companies have applied to produce and supply ethanol. Among them, Kian Chemicals Industries Pvt. Ltd. has announced plans to establish production facilities at three locations, aiming to bring in nearly NPR 10 billion in foreign investment.

According to the company, preliminary agreements have already been reached with foreign investors, banks, and technical partners. However, the absence of an LOI from NOC has prevented the project from moving forward.

“We have repeatedly requested the concerned authorities to expedite the process, but every time we receive the same response - that the matter is still under study,” said Bed Kharel, a representative of the company. “Without the LOI, we cannot finalize agreements with our foreign partners.”

For companies planning to invest in ethanol production, the LOI is considered a crucial document. It serves as an assurance that the Nepal Oil Corporation is likely to purchase the ethanol produced in the future. Based on this commitment, foreign investors, banks, and financial institutions make their investment decisions. Without the LOI, companies say they are unable to secure project financing.

Implementation Stuck in the Government’s Own Process

The government has already established a clear framework for implementing the ethanol blending program. Under the policy, ethanol producers must supply ethanol at government-determined prices, comply with quality standards, and accept all terms and conditions of purchase agreements with the Nepal Oil Corporation.

However, industrialists say the process has stalled at the very first step because the required LOIs have not been issued. The Ministry of Industry was also expected to form a committee to recommend ethanol pricing and incentives for producers, but the implementation of that process has not progressed effectively.

Industry representatives have put forward three key demands:

- Immediately issue LOIs to eligible companies that have already applied.

- Finalize the ethanol pricing mechanism.

- Allow the Nepal Oil Corporation to sign Ethanol Purchase Agreements (EPAs) with producers.

Project Linked to Agriculture and Energy Security

Industry stakeholders say ethanol production is not merely an industrial venture but a project that supports both agriculture and national energy security.

Kian Group plans to promote Simal Tarul (elephant foot yam) as an industrial feedstock for bioethanol production. According to the company, the crop can be cultivated even on sandy, marginal, and non-irrigated land, making it suitable for large-scale bioethanol production.

The company aims to expand cultivation over 22,000 hectares in the first phase. It estimates that the project will directly benefit more than 70,000 farmers and indirectly create opportunities for over 440,000 workers. The initiative is also expected to bring idle land into productive use, generate rural employment, and reduce Nepal’s dependence on imported petroleum products.

Meanwhile, the Industrial and Investment Promotion Board has already approved Kian Chemicals Industries to establish a plant in Katahariya Municipality-1, Rautahat, to produce rectified spirit, extra neutral alcohol (ENA), anhydrous ethanol, and denatured spirit.

The proposed investment in the project is NPR 1.6 billion. Once operational, the plant aims to produce 15,000 kilolitres of anhydrous ethanol, 6,000 kilolitres each of rectified spirit and extra neutral alcohol, and 3,000 kilolitres of denatured spirit annually. The industry is expected to create direct employment for 53 people.

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