Centre extends timeline for loan disbursement of ethanol projects till 30 Sep 2023

Under the ‘scheme for extending financial assistance to sugar mills for augmentation of ethanol production capacity’, the central government extends soft loan through banks to the mills for setting up new distilleries/ expansion of existing distilleries and installation of incineration boilers or installation of any method as approved by Central Pollution Control Board for Zero Liquid Discharge. The Government bears interest subvention for the loan disbursed. The Central Government has decided to extend the timeline for disbursement of loans up to 30th September 2023 in respect of all the schemes notified during 2018-2021.

The previous timeline for disbursement of loans for the schemes related to ethanol projects was up to 31 March 2023. However, due to multiple challenges in processing loan applications and coordination with multiple agencies, project proponents were unable to adhere to the time limit for the disbursement of loans from Banks/ Financial institutions. They were unable to complete the projects within the given timeline. Therefore, there is a need to extend the timeline for the disbursement of loans under interest subvention schemes announced earlier during 2018-2021.The government is extending financial assistance in the form of interest subvention @ 6% per annum or 50% of the rate of interest charged by banks, whichever is lower, on the loans to be extended by banks for five years including a one-year moratorium.

The Central Government aims to increase production of ethanol and also supply of ethanol for the Ethanol Blended with Petrol (EBP) Programme, especially in the surplus season. Government policy changes have led to a remarkable increase in molasses-based distilleries’ capacity, soaring from 215 crore liters in 2014 to an impressive 811 crore liters in the past 9 years. India’s grain-based distilleries witnessed a significant capacity growth from 206 crore litres in 2013 to 433 crore litres. Hence, the national ethanol production capacity reached to 1244 crore litres in 2023. In 2013-14, the supply of ethanol to Oil Marketing Companies (OMCs) was 38 crore litres with a blending level of 1.53%. By the year 2020-21, the production and supply of fuel-grade ethanol to OMCs has increased by 8 times.

India achieved a historic milestone in ESY 2020-21 with 408 crore liters of ethanol, achieving a blending rate of 10.02%. By 11.06.2023, ESY 2022-23 recorded 310 crore liters blended, reaching 11.70% blending. The target for the current ESY 2021-22 is 12% blending. To achieve 20% blending by 2025, ethanol production capacity needs to be expanded to 1700 crore liters.

The decision to extend the timeline for ethanol projects would help in enhancing ethanol production capacities further with the vision to boost the agricultural economy, to reduce dependence on imported fossil fuel, to save foreign exchange on account of crude oil import bills & to reduce air pollution.


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