Govt may extend soft loans to grain-based units to spur ethanol output

To boost ethanol production in the country, the government is considering extending subsidised loans to grain-based distilleries also under the ongoing scheme, according to government sources.

The sources said both the petroleum and food ministries are of the view that ethanol production cannot be dependent on one feedstock, that is, sugarcane, for achieving the target of 20 per cent ethanol blending with petrol by 2030.

There is a need to look at other agri-feedstock such as rice, maize, sorghum and barley for making ethanol. After several rounds of discussion, both the ministries are of the opinion to extend soft loans to grain-based distilleries as well under the ongoing scheme, the sources said.

As part of an incentive scheme announced in June 2018, the Centre had approved soft loans for sugar mills to set up new distilleries or upgrade the existing ones, expand capacity, and encourage them to divert sugarcane to ethanol making.

Under the scheme, the government has extended twice the interest subvention that comes up to Rs 4,600 crore for a loan amount of Rs 22,000 crore.

A proposal to modify the existing scheme to include grain-based distilleries would require Cabinet approval, the preparation for which are going on at present, the sources said and added that unused funds under the current scheme will be used for this.

The sources also mentioned that the grains-based distilleries association says that they have at present 75 crore litres capacity for ethanol making. Oil marketing companies have floated tenders for buying grain-based ethanol from them.

When the scheme was launched in 2018, the sources said the government had approved soft loans to sugar mills for augmenting about 195 crore litres of ethanol capacity. Out of which, 101 crore litres capacity is available for use now and the balance will be ready by 2022.

In September-October this year, the government received about 400 applications from sugar mills for installation of 400 crore litres ethanol capacity availing soft loan facility under the scheme. The applications are being vetted now.

In the wake of enhanced ethanol capacities and good cane crop, the government has estimated that over 300 crore litres plus ethanol would be available for blending in 2020-21, much higher than 180 crore litres in 2019-20.

Currently, India has a total 426 ethanol capacity, of which about 130 crore litres capacity is used for making other products like portable liquor and sanitisers. The rest is available for ethanol making.

With an expected increase in supply of ethanol this year, the government hopes to achieve the target of 10 per cent ethanol blending in 2020-21.