Centre plans ₹4,573-crore scheme for enhancing ethanol capacity in the country

In a move that may help the country solve many problems, the Cabinet Committee on Economic Affairs (CCEA) decided to extend an additional financial assistance of ₹4,573 crore for setting up distilleries to produce more ethanol in the country.

As per the decision, the government would bear interest subvention for five years including one year moratorium against the loan availed by firms for setting up the distilleries — based on sugarcane or foodgrains — from banks at a rate of 6 per cent per annum or 50 per cent of the rate of interest charged by banks whichever is lower, said Dharmendra Pradhan, Minister for Petroleum and Natural Gas at a briefing on Wednesday.

Interest subvention would be available to only those distilleries which will supply at least 75 per cent of ethanol produced from the added distillation capacity to oil marketing companies. This is in addition to an interest subvention scheme announced by the government for ethanol production, he added.

The measure will help India produce as much as 1,400 crore litre of ethanol. While 1,000 crore litre of ethanol will be used for blending with petrol and thus reduce forex outflow for buying oil and enhance incomes of farmers, the remaining 400 crore litre will be used as chemical industry feedstock, he said.

According to the government, a total of 1,750 crore litre of ethanol can be produced with an investment of ₹40,000 crore and some investment has already happened, said Pradhan.

Excess production

The move is expected to reduce the excess production of sugar and thus ease pressure on sugar price in the country. Sugar industry annually produces nearly 60 lakh tonnes excess sugar, which remains unsold - blocking funds of sugar mills to the tune of ₹19,000 crore, affecting their ability to pay farmers. Similarly, India would be able to provide financial assistance to sugar industry for exporting sugar only till 2023 under the WTO arrangements.

Pradhn indicated that the government, which earlier fixed 2030 as deadline for 20 per cent ethanol blending, may prepone the date. The deadline for achieving 10 per cent blending is 2022. This year, OMCs have already given out tenders for producing 325 crore litre of ethanol as compared to about 172.50 crore litre of ethanol supplied by distilleries to OMCs in Ethanol Year 2019-20 to achieve 5 per cent blending.

Indigenous fuel

Proposed intervention would enhance production of 1G ethanol from various feed stocks thereby, facilitate in achieving blending targets of ethanol with petrol and would promote ethanol as a fuel which is indigenous, non-polluting and virtually inexhaustible and would improve the environment and the eco-system and result in savings on oil import bill.

Realising that blending targets cannot be achieved by diverting sugarcane or sugar alone, the government has decided to allow ethanol production from other feedstock such as grains. Apart from rice and maize, grains like wheat, barley and sorghum would be used for producing ethanol. While sugarcane can produce 700 crore litre of ethanol, an additional 700 core litre can come from 175 lakh tonnes of foodgrains, the Minister said.

The interest subvention scheme will be available for setting up stand-alone grain-based distilleries using dry milling process or capacity expansion, molasses based distilleries which adopt zero liquid discharge technologies, putting up dual feed (sugarcane as well as grains) distilleries or for converting existing single feed distilleries to dual feed distilleries, a statement said.

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