KN Group, a top commodities trader, plans to raise ethanol production capacity at a newly acquired plant and build a greenfield facility to cash in on rising domestic demand for the biofuel, a senior company official said.

India is the world's third-biggest oil importer, relying on foreign suppliers to meet more than 80% of its demand. Late last year, New Delhi approved a proposal to achieve 20% ethanol-blending with gasoline by 2025, five years ahead of its previous target.

With 20% ethanol blending, India can save ₹30,000 crore ($4.01 billion) a year in foreign exchange for its crude oil imports, according to a government think tank.

"We have ambitious plans for the ethanol sector to help reduce India's dependence on crude oil and other energy resources," Vijay Shrishrimal, managing director of Mumbai-based K.N. Group, told Reuters.

The company, a leading xporter of molasses - a sugarcane byproduct - has just bought a 100,000-litre a day ethanol plant and plans to set up a new 100,000 litres a day facility in western regionI Shrishrimal said.

"At the plant that we have just acquired, we plan to raise ethanol production capacity to 160,000 litres a day from 100,000 litres," he said.

"Currently, we can produce ethanol only from molasses but we will soon have the facility to produce ethanol from sugarcane juice and that will fetch us better realisation because ethanol made from sugarcane juice is priced higher."

KN Agri Resources Ltd, a K.N. Group company, is considering an initial public offering (IPO) next month to fund the group's foray into the ethanol business.

KN Agri Resources has traditionally been in soybean crushing, edible oil refining, flour milling and commodities trading.

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