₹4,687 crore interest subsidy approved for ethanol projects: Govt

The government has approved ₹4,687 crore in interest subsidies for ethanol projects and released ₹2,075 crore to Nabard since FY23 to support capacity expansion

The Union government has approved ₹4,687 crore in interest subsidies for eligible ethanol projects under various support schemes, Minister of State for Petroleum and Natural Gas Suresh Gopi informed Parliament on Monday.

 

In a written reply in the Rajya Sabha, Gopi said the government has released ₹2,075 crore to the National Bank for Agriculture and Rural Development (Nabard) since 2022-23. Nabard is the nodal agency responsible for disbursing the interest subsidy.

 

The financial support is aimed at encouraging investment in ethanol production capacity, strengthening India's biofuel infrastructure and advancing the country's ethanol blending programme. The scheme is part of the government's broader strategy to improve energy security, reduce dependence on imported crude oil and promote cleaner transport fuels.

 

 

How the subsidy framework works

 

Under the government's ethanol promotion programme, eligible projects receive an interest subvention of 6 per cent per annum or 50 per cent of the interest charged by banks and financial institutions, whichever is lower, for five years. The benefit is available on term loans taken to set up new distilleries or expand ethanol production capacity at existing facilities, and includes a one-year moratorium on loan repayment.

 

The scheme covers molasses-based, grain-based and dual-feed distilleries, as well as projects to expand ethanol manufacturing capacity.

 

What other incentives are available for ethanol producers?

 

The interest subsidy is part of a broader policy framework to encourage investment across the ethanol value chain. Under the PM JI-VAN Yojana, the government provides financial support and viability gap funding for second-generation (2G) bioethanol projects that use agricultural residues and biomass as feedstock.

 

The government has also introduced a separate interest subvention scheme to help cooperative sugar mills convert single-feedstock distilleries into multi-feedstock facilities capable of processing maize and damaged foodgrains alongside sugarcane. In addition, ethanol supplied under the Ethanol Blended Petrol (EBP) programme attracts a concessional Goods and Services Tax (GST) rate of 5 per cent, while public sector oil marketing companies provide long-term offtake agreements, offering producers greater demand certainty.

 

Half of ONGC's Mangaluru storage to be kept as strategic reserve

 

Separately, Gopi informed the Rajya Sabha that half of the 1.75 million tonne petroleum storage facility being developed by state-run Oil and Natural Gas Corporation (ONGC) at Mangaluru will be earmarked for India's Strategic Petroleum Reserve (SPR), while the remaining capacity will be used for commercial operations. The project is being fully funded by ONGC.

 

He said the government, through Indian Strategic Petroleum Reserve Limited (ISPRL), has established Phase-I strategic petroleum reserve facilities with a combined capacity of 5.33 million tonnes of crude oil at Visakhapatnam (1.33 million tonnes), Mangaluru (1.5 million tonnes) and Padur in Karnataka (2.5 million tonnes).

 

Besides these underground reserves, India has crude oil and refined petroleum product storage infrastructure across offshore facilities, refineries, terminals and a pipeline network spanning more than 35,000 km, including above-ground storage tanks, pipeline systems, terminal tankages and refinery storage. Collectively, the country's storage capacity is sufficient to meet 74 days of its net crude oil import requirement, Gopi said.