Centre notifies plan to boost ethanol output from sugar, cereals

NEW DELHI: The Union government on Thursday notified a modified scheme to incentivise ethanol production in the country which will allow sugar mills cheaper loans to make new investments.

Blending of petrol with ethanol, made from molasses, a byproduct of sugar, is aimed at cutting the country’s dependence on imports for oil.

The scheme will also help millers clear arrears to cane farmers, the government said in a statement.

The government has fixed a target of 10% blending of fuelgrade ethanol with petrol by 2022 and 20% blending by 2030.

To increase the production of fuel-grade ethanol, the government will also encourage distilleries to produce ethanol from maize and rice stocks available in state-held granaries run by the Food Corporation of India.

Under the scheme, millers will be able to divert excess sugar stocks for ethanol production.

India has seen a surplus production of sugar in the country since 2010-11, except in 2016-17, when drought had cut output.

“In normal sugar season (October- September) about 320 Lakh Metric Tonnes (LMT) of sugar is produced whereas, our domestic consumption is about 260 LMT,” a statement by ministry of food had earlier said.

“Under the scheme , the government would bear interest subvention for five years, including one year moratorium against the loan availed by project proponents from banks @ 6% per annum or 50% of the rate of interest charged by banks, whichever is lower for setting up of new distilleries or expansion of existing distilleries or converting molasses based distilleries to dual feedstock,” an official notification from the government said.

This is likely to bring an investment of about ₹40,000 crore.

The government said the upcoming ethanol projects would be viable because oilmarketing companies would be assured buyers of ethanol for next 10 years under the scheme.

This scheme is designed to not only divert excess sugar for ethanol production but would also encourage farmers to diversify their crops to cultivate less water-guzzling such as maize or corn, which too would go into ethanol production.

“This will achieve blending targets of ethanol with petrol and reduce import dependency on crude oil,” said Anil Rana, a sugar industry consultant.