Cabinet okays Rs 15,500-cr loan for sugar mills to boost ethanol capacity

To boost ethanol capacity in sugar mills, the Cabinet Committee on Economic Affairs (CCEA) on Thursday cleared an extra soft loan of Rs 15,500 crore under a recently launched scheme. The government will bear an expenditure of Rs 3,355 crore as interest subvention for this.

This includes a soft loan of Rs 2,600 crore which will be provided to molasses-based standalone distilleries to augment capacity and set up new units.

In June 2018, the government announced a soft loan of Rs 4,400 crore and provided an interest subvention of Rs 1,332 crore to mills over five years, including a moratorium period of one year, to augment ethanol output.

So far, the food ministry has approved 114 applications for a loan amount of Rs 6,000 crore although applications received were for over Rs 13,400 crore worth of soft loans.

“To augment ethanol capacity, the government has approved additional funds. These additional funds will be in two categories — Rs 2,790 crore and Rs 565 crore,” Finance Minister Arun Jaitley told reporters after the Cabinet meeting.

The additional funds are part of the government’s measure to address the stress in the sugar sector, he said, adding that “they (mills) have some stress and outstanding dues. The government is trying to augment the income of mills”. Asked if this additional soft loan will help bring down the mounting cane arrears, Jaitley said it would not have any impact immediately, but would help in the long term.

Sugarcane dues have crossed Rs 20,000 crore till February of this marketing year (October-September).

The food ministry would frame a separate scheme for the molasses-based standalone distilleries.

Both the interest subvention will be payable at 6 per cent per annum or 50 per cent of commercial rate of interest charged by banks, whichever is lower, according to the scheme approved by the CCEA in June 2018.

Welcoming the decision, Indian Sugar Mills Association (ISMA) Director General Abinash Verma said, “Along with the earlier approval in September 2018 of loans of over Rs 6,000 crore, the additional loans of around Rs 15,000 crore could help in creation of another 300-400 crore litres of ethanol capacities in the country.”
 

Considering the current ethanol capacity of 355 crore litres, the country is expected to cross 10 per cent blending with petrol in the next year itself, he said.

Ethanol extracted from sugarcane will be used for blending in petrol and will provide cane farmers a remunerative price for their crop. Ethanol doping in petrol would also help the country cut its oil imports.

Earlier this month, the CCEA approved a proposal to grant a soft loan of Rs 8,000-10,000 crore to sugar mills that would be paid directly to farmers. The loans will be provided at a subsidised interest rate of 7-10 per cent for one year, for which government will bear an interest subsidy burden of Rs 553-1,054 crore. This loan will be transferred directly into farmers’ bank accounts.

India, the world's second-biggest producer, is likely to produce 30.7 million tonnes of sugar in the current marketing year, compared with 32.5 MT during 2017-18, according to ISMA’s forecast.