Govt extends soft-loans for ethanol to non-sugarcane-based distilleries

Move will cost govt Rs 4,573 cr, is a step forward in broader plan to achieve 20 per cent blending with petrol by 2030

To meet the ambitious target of 20 per cent ethanol blending with petrol by 2030 from less than 10 per cent currently, the Union Cabinet today extended the soft loan scheme for capacity expansion to distilleries that use crops other than sugarcane as their feedstock that includes rice, maize, sorghum, wheat, barley, corn and sugar beet.

So far, the soft loan scheme for capacity expansion was available for integrated and standalone distilleries that produced ethanol only from sugarcane.

“The total cost to exchequer due to this extension will be around Rs 4,573 crore,” Petroleum Minister Dharmendra Pradhan told reporters after the meeting of the cabinet.

Under the soft loan scheme, Central government gives a subvention of 6 per cent if the rate of interest is 12 per cent or more and if the rate of interest is less than 12 per cent, then it gives a subvention upto 50 per cent of that amount.

The scheme will be available even for those sugar mills that want to produce ethanol from both sugarcane and non-sugarcane sources.

In the soft loan scheme so far, around 120 sugar mills have applied for loans for capacity expansion and good number of them have already received the funds.

India at present allows production of ethanol from both sugarcane and non-sugarcane sources that primarily include grains, maize and some other items.

Government has fixed target of 10 per cent blending of fuel grade ethanol with petrol by 2022, 15 per cent blending by 2026 and 20 per cent blending by 2030.

However, industry sources said to achieve the target of 20 per cent ethanol blending with petrol, just relying on sugarcane as a feedstock won’t be enough and the share of non-sugarcane sources in ethanol production needs to be ramped up.

But, this will not be possible as distilleries didn’t have adequate capacity to produce ethanol from non-sugarcane sources.

According to some estimate, India needs around 11 billion litres of ethanol to achieve its target of 20 per cent blending by 2030. Of this, sugarcane will be able to contribute around 6 billion litres as there is limit to which farm lands can be diverted towards sugarcane.

To make up the remaining 4-5 billion litres, the government has to rely on other sources for feedstock that includes surplus rice, maize, sorghum, sugar beet etc.

The current production capacity of non-sugarcane based ethanol in India is around 0.25-0.30 billion litres which needs to upped to 3-4 billion litres to meet the new requirement.

“After today’s decision, this additional capacity will get created among both and integrated and standalone distilleries which on one hand help in meeting the blending target while at the same time create ethanol production capacities in non-sugarcane but rice and maize surplus states of Bihar, West Bengal etc,” a senior industry official commented.

He said while using sources other sugarcane for making ethanol, plants first convert the feedstock which has high quantity of starch in them, which is then converted into sugar and thereafter into ethanol.