New Delhi: The Cabinet Committee on Economic Affairs (CCEA) on Thursday approved funds amounting to Rs 2,790 crore towards interest subvention for extending a soft loan of Rs 12,900 crore by the banks to the sugar mills to boost ethanol production capacity.
The loan will help the millers improve liquidity, reduce cane dues of farmers and achieve the target of 10 per cent blending in the Ethanol Blended Petrol Programme (EBP), as per a statement.
The funds under the "Scheme for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity" are in addition to the Rs 1,332 crore approved in June last year.
The CCEA also approved Rs 565 crore towards interest subvention for extending a soft loan amount of Rs 2,600 crore by banks to the molasses-based standalone distilleries to augment capacity through installation of incineration boilers and other methods for achieving zero liquid discharge (ZLD).
"This decision would further help in achieving the blending target for mixing ethanol and in achieving the objectives of the National Bio-Fuel Policy, 2018. It will also help in reducing sugar inventories by diversion of B-Heavy molasses and sugarcane juice for ethanol production and thereby sacrificing sugar during surplus phase," read the statement.
It will also improve liquidity of sugar mills by way of value addition to their revenues from supply of ethanol under EBP, thereby facilitating them to clear the cane price dues of the farmers.
Abinash Verma, Director General of the Indian Sugar Mills Association (ISMA), said it was an "excellent" decision taken by the government to allow more sugar mills to avail the benefit of subsidised loans to set up ethanol projects.
"Considering the current ethanol capacity of 355 crore litre, we will cross 10 per cent blending with petrol in the next year itself. The year thereafter could see us substituting even 15 per cent of the country's petrol consumption," Verma said.
Verma said it will help the sugar industry reduce surplus sugar production by diverting the surplus sugarcane into ethanol, which could see a reduction of 1.5 to 2 million tonnes of sugar production from the next year itself.
The total sugar production in the country is expected to be around 307 lakh tonnes in 2018-19 as against 322.5 lakh tonnes in 2017-18.