KATHMANDU, March 11: With the government implementing a policy to blend 10 percent ethanol into petrol, private and non-resident Nepali investors are showing growing interest in alternative fuel production. The approval of the “Order on Using Ethanol in Petrol, 2082” has established a legal framework for producing ethanol domestically and mixing it with petrol for sale.
Following the cabinet’s approval, Nepal Oil Corporation (NOC) is set to begin blending ethanol into petrol. Managing Director Dr Chandika Prasad Bhatta said that once procedures are finalized, the corporation will develop the necessary infrastructure for ethanol production, procurement, and blending. The initiative is expected to reduce petrol imports, save foreign currency, and lower engine emissions, making fuel use more environmentally friendly.
The policy has also attracted large-scale investment proposals from the Nepali diaspora. Non-resident Nepalis based in the U.S. have proposed establishing Kian Chemicals Industries Pvt. Ltd. in Nepal, with an estimated investment of around Rs 1.2 billion to produce ethanol domestically. The company plans to set up three plants in Parsa, Koshi, and Lumbini provinces, covering production, raw material supply chains, and processing capacity. If implemented, approximately 2,000 people could gain direct employment, while around 2 million would be involved in raw material production, including cassava cultivation, providing farmers with new income opportunities.
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According to NOC studies, blending 10 percent ethanol into petrol could reduce daily petrol consumption by roughly 400,000 liters. Nepal’s current daily petrol usage averages 2 million liters, totaling about 73 million liters annually. Implementing the 10 percent blend could cut petrol imports by approximately 7.3 million liters per year. With NOC purchasing petrol from Indian Oil Corporation at around Rs 85 per liter, this could save over Rs 600 million in foreign currency annually. The Ministry of Industry, Commerce, and Supplies has projected similar import reduction benefits.
Ethanol production will rely on agricultural and organic resources, such as molasses, napier grass, crop residues, and unusable grains, promoting greater use of agricultural outputs and providing additional income for farmers. Industrial stakeholders emphasize the importance of government incentives to expand ethanol production, which could simultaneously support rural economies by utilizing agricultural waste and other biomass.
The order stipulates that ethanol must not be produced from grains directly used for food, and all production must be sold exclusively to NOC. The Nepal Bureau of Standards and Metrology will ensure ethanol quality, and production processes must be environmentally friendly. Prices for ethanol will be determined by the cabinet based on recommendations from a committee led by the Ministry of Industry, Commerce, and Supplies.
Although plans to blend ethanol into petrol were considered nearly two decades ago in 2060 BS, the absence of operational procedures and production infrastructure delayed implementation. With the current policy and legal framework in place, the government expects to expand alternative energy sources and agro-based industries, achieving reduced petrol imports, foreign currency savings, and rural employment simultaneously.
