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Loan/Completion of Ethanol Projects: Centre Extends Timeline till September 30, 2023

By providing extended financial assistance and support, the central government aims to accelerate the growth of the ethanol industry, contributing to India's energy security and sustainable development goals.

Shivam Dwivedi
Government Extends Timeline for Disbursement of Loans to Boost Ethanol Production (Photo Source: Pexels)
Government Extends Timeline for Disbursement of Loans to Boost Ethanol Production (Photo Source: Pexels)

In a move aimed at bolstering ethanol production in India, the central government has decided to extend the timeline for the disbursement of loans to sugar mills. The scheme, which provides financial assistance for the augmentation of ethanol production capacity, offers soft loans through banks to mills for various purposes such as setting up new distilleries, expanding existing ones, and installing eco-friendly technologies.

Under the scheme, the government provides interest subvention for the disbursed loans and has now extended the loan disbursement timeline until September 30, 2023. This extension applies to all schemes that were notified during the period from 2018 to 2021. Previously, the deadline for loan disbursement for ethanol projects was set on March 31, 2023.

The decision to extend the timeline was prompted by challenges faced in processing loan applications and coordinating with multiple agencies. Many project proponents were unable to adhere to the original deadline, resulting in delayed loan disbursements and incomplete projects. To address this issue, the government recognized the need for an extension.

The central government provides financial assistance in the form of interest subvention at a rate of 6% per annum or 50% of the interest charged by banks, whichever is lower. This assistance is applicable for a period of five years, including a one-year moratorium. The primary objective behind these measures is to increase ethanol production and supply for the Ethanol Blended with Petrol (EBP) Programme, particularly during surplus seasons.

Over the years, government policies have led to a significant expansion in both molasses-based and grain-based distilleries. The capacity of molasses-based distilleries has surged from 215 crore liters in 2014 to an impressive 811 crore liters in 2023. Similarly, grain-based distilleries have witnessed a substantial growth from 206 crore liters in 2013 to 433 crore liters. As a result, India's national ethanol production capacity has reached 1244 crore liters in 2023.

The impact of these efforts is evident in the supply of ethanol to Oil Marketing Companies (OMCs). In 2013-14, the supply was 38 crore liters with a blending level of 1.53%. By 2020-21, the production and supply of fuel-grade ethanol to OMCs had increased by a staggering eight times.

In the ESY 2020-21, India achieved a historic milestone by producing 408 crore liters of ethanol, achieving a blending rate of 10.02%. By June 11, 2023, during ESY 2022-23, the country had already recorded 310 crore liters blended, reaching a blending rate of 11.70%. The target for the current ESY 2021-22 is a 12% blending rate. To achieve the ambitious goal of 20% blending by 2025, India's ethanol production capacity needs to be expanded to 1700 crore liters.

The decision to extend the timeline for ethanol projects is expected to facilitate further enhancement of ethanol production capacities. This move aligns with the government's vision to boost the agricultural economy, reduce dependence on imported fossil fuels, save foreign exchange on crude oil imports, and mitigate air pollution.

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