Rs 4,573 crore interest subsidy scheme approved to increase ethanol production capacity

The Union Cabinet on Wednesday approved an interest subsidy scheme of Rs 4,573 crore to boost ethanol production in the country.

The government has approved the scheme to provide cheaper loans to distilleries producing ethanol for mixing in petrol. The aim is to consume surplus sugar production and reduce crude oil imports on the other side.

Petroleum Minister Dharmendra Pradhan said that the government aims to double the ethanol mixture in petrol to 20 percent by 2030. For this, it is necessary to increase domestic production capacity.

The Cabinet Committee on Economic Affairs (CCEA) meeting on Wednesday chaired by Prime Minister Narendra Modi approved the revised scheme of interest subsidy for expanded ethanol production capacity.

Pradhan said that the government will bear the burden of interest subsidy for five years. It will also include a one-year moratorium on the payment of loans taken from banks for the project. The government will bear six percent per annum or 50 percent of the interest rate charged by banks (whichever is lower) under the scheme.

This interest subsidy will be extended to new and existing molasses or grain-based distilleries and to units producing ethanol from beetroot, sorghum and coarse grains.

After the cabinet meeting, Pradhan told reporters that the Rs 4,687 crore interest subsidy scheme had been approved earlier. Now, Rs 4,573 crore has been sanctioned.

Currently, the country’s molasses-based ethanol production capacity is 426 million liters. This capacity is used to supply for mixing in the liquor industry and petrol.

Pradhan said that during the 2019-20 (December, 2019 to November, 2020) 173 crore liters of ethanol were purchased for mixing in petrol. He said the average mixture this year has been nine percent.