The Food Ministry on Friday said it has given in-principle approval to 185 sugar mills and standalone distilleries to avail Rs 12,500 crore of loans for capacity addition of about 468 crore litre of ethanol per annum as part of its efforts to achieve 20 per cent blending with petrol.
In the last two years, 70 ethanol projects were sanctioned loans of Rs 3,600 crore.
Apart from promoting ethanol production from sugarcane, the ministry is making efforts to manufacture ethanol using surplus rice with state-owned FCI as well as maize.
The move is aimed at boosting ethanol blending with petrol, which currently stands at nearly 5 per cent.
"Under the ethanol interest subvention scheme for molasses-based distilleries, the government in September 2020 has opened a window for 30 days to invite more applications from sugar mills/ distilleries, which were examined by DFPD...
"about 185 applicants (85 sugar mills and 100 molasses-based standalone distilleries) are being granted in-principle approval for availing loan amount of Rs 12,500 crore for capacity addition of about 468 crore litres per annum," the Food Ministry said in a statement.
These projects would be completed in another 3-4 years, thus help in achieving the desired blending target, it added.
In the normal sugar season, about 320 lakh tonnes of sugar is produced against domestic consumption of 260 lakh tonnes.
This 60 lakh tonnes of surplus sugar which remains unsold, blocks funds of sugar mills to the tune of about Rs 19,000 crore every year, thereby affecting liquidity positions of sugar mills resulting in accumulation of cane price arrears of farmers, the ministry said.
To deal with surplus sugar stocks, the government is providing financial assistance to mills for the export of sweetener.
However, India being a developing country can export sugar by extending financial assistance for marketing and transport only up to 2023 as per WTO arrangements, the statement said.
For long term solution to deal with surplus sugar, the government has been encouraging diversion of excess sugarcane & sugar to ethanol for supplying to Oil Marketing Companies (OMCs) for blending with petrol.
The move would not only reduce import dependency on crude oil but will also enhance the income of sugarcane farmers.
The ministry said that the government had earlier fixed a target of 10 per cent blending of fuel-grade ethanol with petrol by 2022 and 20 per cent blending by 2030 but now it is preparing a plan to pre-pone achievement of 20 per cent blending target.
The government is encouraging sugar mills, distilleries and entrepreneurs to set up new distilleries and to expand their existing distillation capacities.
It is extending financial assistance by way of interest subvention for 5 years at 6 per cent maximum rate of interest against the loans availed by sugar mills/distilleries from banks for setting up their projects.
In the past two years, loans of about Rs 3,600 crore have been sanctioned for 70 such ethanol projects (molasses-based distilleries) which involve capacity enhancement of 195 crore litres. Out of these 70 projects, 31 projects have been completed adding a capacity of 102 crore litres so far.
The existing installed capacity of molasses-based distilleries has reached to 426 crore litres.
As the blending targets cannot be achieved only by diverting sugarcane/sugar to ethanol, the food ministry said that the government is encouraging distilleries to produce ethanol from other feedstocks like grains.
"Therefore, concerted efforts are being made by Government to enhance ethanol distillation capacity in the country by 720 crore litre for producing ethanol from 1st Generation (1G) feedstocks like sugarcane, molasses, grains, sugar beet, sweet sorghum etc," the statement said.
The government is making efforts for the production of ethanol from surplus rice with FCI to supply to OMCs to mix with petrol in Ethanol Supply Year 2020-21 (December-November).
The efforts are also being made to produce ethanol from maize in states which have sufficient production of maize.
In the current ethanol supply Year 2019-20 only 168 crore litres of ethanol is likely to be supplied to OMCs for blending with petrol thereby achieving 4.8 per cent blending levels.
However, in 2020-21, the target is to supply 325 crore litres of ethanol to OMCs for achieving 8.5 per cent blending. In the ethanol supply year 2021-22 ending in November 2022, the target is to achieve 10 per cent blending.
For Year 2020-21, bids of 322 crore litres (289 crore from molasses and 34 crore litre from grains) have already been received in the first tender floated by OMCs and in subsequent tenders, more quantity from molasses and grain-based distilleries will come.
"In next few years with 20% ethanol blending with petrol, Government will be able to reduce import of crude oil, a step towards being Atma Nirbhar in the petroleum sector and this will also help in increasing the income of farmers and creating additional employment in distilleries," the statement said.