Indian Government Modified Notified Scheme on Ethanol Production

The Indian government notified a modified scheme to provide financial assistance to distilleries producing first-generation ethanol from sugarcane and other crops. The assistance will be given for capacity expansion, encourage entrepreneurs to setting up of new ethanol distilleries, particularly, the first one in Chhattisgarh state under the Public-private partnership (PPP) model to meet the target cutting dependency on oil imports. In doing so, India will need about 1,000 crore litres of ethanol for doping in petrol by 2030.

The Union Cabinet, Minister Dharmendra Pradhan said under the scheme, the government will bear interest subvention for five years, including one-year moratorium against the loan availed by project proponents from banks at 6 per cent per annum or 50 per cent 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. The new program is expected to bring about ₹400 billion ($5.47 billion) in investments.

The prospective investment in capacity addition and new distilleries will create various new employment opportunities in rural India. There is sufficient availability of feedstocks for ethanol production, and the government has set remunerative prices. Oil marketing companies are assured buyers of ethanol. About 50 million sugarcane farmers and 500,000 workers associated with sugar mills and other ancillary activities would be benefitted.

The new financial assistance program is expected to bring in investments worth ₹400 billion

The government has a target of 10% blending of fuel-grade ethanol with petrol by 2022 & 20% blending by 2030 to boost the agricultural economy, reduce dependence on imported fossil fuel, save foreign exchange on crude oil imports, and to reduce air pollution. It is expected that in the current supply year (2020-21), about 3.25 billion liters of ethanol would be supplied to oil companies to achieve 8.5 % blending levels.

To achieve well within the timeline. The state governments have also signed the contract to set up the first ethanol plant in the state under the Public-private partnership (PPP) model. On behalf of the state government, the MoU was signed by Bhoramdev Cooperative Sugar Factory Kawardha and Chhattisgarh Distillery Limited for a period of 30 years. The ethanol plant will generate direct and indirect employment opportunities in the region and will form the basis for economic prosperity in the region, and the demand for sugarcane will increase as well.

“For the Ethanol plant to be set up by Chhattisgarh Distilleries Ltd with a capacity of 40 kilo liter per day (KLPD), a tender of Rs 5.27 crore per annum has been accepted. Under the PPP model, only land will be made available by the factory on licence. More than Rs 100 crore will be disinvested by the investor on setting up the ethanol plant. The plant is planned to be completed within one and a half to two years to start ethanol production,” a government official said.

Uttar Pradesh, Maharashtra, and Karnataka are the major sugarcane and ethanol producers. Shipping ethanol to far-flung states from these three states involves huge transportation costs. However, new grain-based distilleries across the country would result in the distributed production of ethanol and save transportation costs while preventing further delays in meeting the blending targets.

Adding that the nation currently has a capacity of 684 crore litres to achieving 1,000 crore litre of ethanol for doping in petrol. In December 2020, the Ministry of Road Transport and Highways had sought comments from the public on adopting E20 (Ethanol 20) as an automotive fuel. The program would facilitate the diversion of excess sugar to ethanol and encourage farmers to diversify their crops from sugarcane and rice to maize and corn, which need less water.