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New Delhi: The Union Cabinet on Wednesday approved a scheme to provide bank loans at lower rates to distilleries producing ethanol for doping in petrol, with a view to raising India’s ethanol production capacity to suck out surplus sugar as well as cut oil imports.
Oil Minister Dharmendra Pradhan said the government is targeting to more than double blending of ethanol in petrol to 20 per cent by 2030, for which domestic production capacity has to be augmented.
The Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi, approved a modified scheme for extending interest subvention to augment ethanol production capacity, he said.
The government would bear interest subvention for five years, including one-year moratorium against the loan availed by project proponents from banks, at the rate of 6 per cent per annum or 50 per cent of the rate of interest charged by banks, whichever is lower.
The interest subvention would be available for setting up new as well as an expansion of existing molasses or grain-based distilleries and for units that will produce ethanol from other feedstocks such as sugar beet, sweet sorghum and cereals.
“Previously, Rs 4,687 crore interest subvention scheme was approved and now Rs 4,573 crore has been sanctioned,” he said during a news conference called to brief on decisions taken by the Cabinet.
Currently, India has a molasses-based ethanol production capacity of 426 crore litres. This capacity used for supply to both the liquor industry as well as for the blending or doping in petrol.
During 2019-20 ethanol supply year (December 2019 to November 2020), 173 crore litre was procured for doping in petrol, he said adding that this year’s average blending has been 9 per cent.
For next year (December 2020 to November 2021), 325 crore litre has been contracted and the volume will rise to 1,000 litres in 2030 when one-fifth (20 per cent) of petrol is targeted to be ethanol, he said.
For this to happen, ethanol manufacturing capacity has to be raised to 1,750 crore litres, which would require an investment of Rs 40,000 crore.The government, he said, is providing remunerative price for buying ethanol as well as a committed offtake for 10 years.
“Interest subvention would be available to only those distilleries that will supply at least 75 per cent of ethanol produced from the added distillation capacity to oil marketing companies for blending with petrol,” a government statement issued after the Cabinet briefing said.
To achieve 20 per cent blending by 2030 and to meet the requirement of chemical and other sectors, about 1,400 crore litres of alcohol/ethanol would be required. Out of this, 1,000 crore litres would be required to achieve 20 per cent blending in petrol and the rest would be the requirement of chemical and other sectors.
Out of the total requirement, 700 crore litres is required to be supplied by the sugar industry and an equal amount by grain-based distilleries.To produce 700 crore litre of ethanol by the sugar industry, about 60 lakh tonne of surplus sugar would be diverted to ethanol which would solve the problem of excess sugar. It will relieve sugar industry from the problem of storage and improve the revenue realisation of sugar mills, which will facilitate them in making timely payment of cane dues of sugarcane farmers, Pradhan said.
About five crore sugarcane farmers and their families and five lakh workers associated with sugar mills and other ancillary activities would be benefitted with this intervention.
To produce 700 crore litre of ethanol/alcohol from food grains, about 175 lakh tonnes of food grains would be utilised which will help farmers get a better price for their produce.Sugarcane and ethanol are produced mainly in Uttar Pradesh, Maharashtra and Karnataka.
Transporting ethanol to far-flung states from these three states involves huge transportation cost. Bringing new grain-based distilleries in the entire country would result in the distributed production of ethanol, helping save on transportation cost and cut delays.
Pradhan said in ethanol supply year (ESY) 2013-14, the supply of ethanol to oil companies was less than 40 crore litres with petrol blending levels of only 1.53 per cent.In the past six years, the procurement has been stepped up and 172.50 crore litre ethanol bought in ESY 2019-20 helped achieve 5 per cent blending.
“It is expected that in the current ethanol supply year 2020-21, about 325 crore litres of ethanol is likely to be supplied to oil marketing companies to achieve 8.5 per cent blending levels. It is likely that we will be achieving 10 per cent blending target by 2022,” he said.
With the increase in blending levels, dependence on imported fossil fuel will decrease and so will air pollution.
The statement said there is surplus production of sugar in the country as the sugar season 2010-11 (except reduction due to drought in sugar season 2016-17). Sugar production is likely to remain surplus in the country in coming years due to the introduction of improved varieties of sugarcane.
In normal sugar season (October-September), about 320 lakh tonnes of sugar is produced as against domestic consumption of about 260 lakh tonnes.The surplus sugar has led to sugar mills delaying payments to came farmers.
“Diversion of excess sugarcane and sugar to ethanol is a correct way forward to deal with surplus stocks. Diversion of excess sugar would help in stabilizing the domestic ex-mill sugar prices and will also help sugar mills to get relieved from storage problems.
“It will improve their cash flows and facilitate them in the clearance of cane price dues of farmers; and will facilitate mills to function in the coming years,” it said.To increase the production of fuel-grade ethanol, the government is also encouraging distilleries to produce ethanol from maize and rice available.
ETEW