Government Extends Loan Disbursement Timeline for Ethanol Projects

The government has offered to bear the interest subvention at 6% per annum for the loan disbursed


The Indian government has announced an extension of the timeline for the disbursement of loans for ethanol projects in the country up to September 30, 2023, to accommodate the complex application processing and coordination required with multiple agencies.

The government will provide financial assistance to such projects in the form of interest subvention at a rate of 6% per annum or 50% of the interest charged by banks, whichever is lower, for five years, including a one-year moratorium.

Under the Program for Extending Financial Assistance to Sugar Mills for Augmentation of Ethanol Production Capacity, the central government extends soft loans 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.

Recognizing the challenges project proponents face in adhering to the original timeline for loan disbursement, the government said it has decided to extend the deadline for all programs notified during 2018-2021.

The move aims to further support sugar mills in their efforts to enhance ethanol production. The extension is expected to facilitate the setting up of new distilleries, the expansion of existing distilleries, and the installation of eco-friendly technologies for zero liquid discharge.

By boosting ethanol production, the government aims to strengthen the agricultural economy, reduce reliance on imported fossil fuels, save foreign exchange on crude oil imports, and mitigate air pollution.

Expansion of Ethanol Production Capacity

India has witnessed a remarkable increase in ethanol production capacity in recent years. The capacity of molasses-based distilleries has surged from 2.15 billion liters in 2014 to 8.11 billion liters in 2023.

Additionally, grain-based distilleries experienced significant growth, reaching 4.33 billion liters from 2.06 billion liters in 2013. Consequently, the national ethanol production capacity has reached an impressive 12.44 billion liters in 2023.

The government’s push for ethanol production is driven by the aim to increase the ethanol supply for the Ethanol Blended with Petrol Program, particularly during surplus seasons.

In 2013-14, ethanol supply to Oil Marketing Companies (OMCs) was 380 million liters, with a blending rate of 1.53%. However, by 2020-21, the production and supply of fuel-grade ethanol to OMCs had increased by eight-fold.

India achieved a historic milestone in the Ethanol Supply Year (ESY) 2020-21, with a production of 4.08 billion liters of ethanol and a blending rate of 10.02%.

In the subsequent ESY 2022-23, recorded blending reached 11.70%, with 3.1 billion liters blended as of 11th June 2023. The target for the current ESY 2021-22 is set at 12% blending.

To achieve the ambitious goal of 20% blending by 2025, expanding the ethanol production capacity to 17 billion liters is crucial.

In June 2022, the Ministry Of Petroleum And Natural Gas (MoP&NG) notified that oil companies would sell ethanol-blended petrol with a percentage of ethanol up to 20% from April 1, 2023.

Earlier, Bharat Petroleum Corporation, Indian Oil Corporation, and Hindustan Petroleum Corporation entered into a long-term purchase agreement for upcoming dedicated ethanol plants across India.