The cabinet committee on economic affairs has approved a modified scheme to enhance the ethanol distillation capacity in the country to curb dependence on fossil fuels. The ethanol will be produced from the surplus food grain and sugarcane, which in turn will help the distressed agriculture sector, and also help farmers get better remuneration. The move has come ahead of the sixth round of talks between the government and farmers to resolve the standoff over the new farm bills.
The scheme aims to promote setting up of new ethanol facilities through extending interest subvention. This scheme will encourage setting up of grain-based distilleries, new molasses-based distilleries, new dual feed distilleries, convert existing molasses-based distilleries to dual feed and also to convert grain-based distilleries to dual feed, and new distilleries to produce ethanol from other feed stocks such as sugar beet, sweet sorghum, cereals.
“To produce 700 crore ltrs of ethanol, alcohol from food grains, about 175 lakh metric tonnes of food grains would be utilised. This extra consumption of surplus food grains would ultimately benefit the farmers as they will get better price for their produce and assured buyers; and thus, will also increase the income of crores of farmers across the country,” the government note said.
Currently, sugarcane and ethanol is produced mainly in three states like Uttar Pradesh, Maharashtra and Karnataka. Under this scheme, facilities will be developed in the entire country that would help local farmers and the sugar mills to pay up their dues.
The country has seen surplus production of sugar since 2010-11 (except reduction due to drought in sugar season 2016-17) and it was likely to remain surplus in years to come due to introduction of improved varieties of sugarcane. In the normal sugar season (October- September) about 320 lakh metric tonnes of sugar is produced whereas our domestic consumption is about 260 LMT.
This surplus sugar of 60 LMT in normal sugar season puts pressure on domestic ex-mill prices of sugar. The excess stocks of 60 LMT that remain unsold also block funds of sugar mills to the tune of about Rs 19,000 crore, thereby affecting liquidity positions of sugar mills resulting in accumulation of cane price arrears of farmers. To deal with surplus stocks of sugar, sugar mills have been exporting sugar. So, diversion of excess sugarcane and sugar to ethanol is an alternative way to deal with surplus stocks.
According to officials, the diversion of excess sugar would help in stabilising the domestic ex-mill sugar prices and will also help sugar mills to get relieved from storage problems. It will improve their cash flows and facilitate them in clearance of cane price dues of farmers and will facilitate mills to function in the coming years.
The government has also fixed a target of 10 per cent blending of fuel grade ethanol with petrol by 2022 and 20 per cent blending by 2030. To increase production of fuel grade ethanol, the government is also encouraging distilleries to produce ethanol from maize; and rice available with FCI. To achieve these targets, the government has to augment ethanol production, which it now intends to meet.
Under the scheme, the government would bear interest subvention for five years, including a one-year moratorium against the loan availed by project proponents from banks at a rate of 6 per cent per annum or 50 per cent of the rate of interest charged by banks, whichever is lower. Interest subvention would be available to only those distilleries that would supply at least 75 per cent of ethanol produced from the added distillation capacity to oil marketing companies for blending with petrol.
