Monday, June 27, 2022

Cabinet gives a nod; govt to bear interest subvention for ethanol distilleries for 5 years

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  • The modified scheme for extending interest subvention makes way for the government to bear interest subvention for distilleries for five years

  • The Cabinet’s decision will facilitate capacity addition and greater ethanol blending will aid import substitution

New Delhi: Union Minister of Petroleum and Natural Gas Dharmendra Pradhan said that the Union Cabinet has approved the expansion of interest subvention scheme to provide financial assistance for enhancement of ethanol distillation capacity from grain-based distilleries along with molasses-based distilleries. The total outlay under the interest subvention scheme is estimated at Rs 8,460 cr. He said that the expanded interest subvention scheme will fuel investment of about Rs 40,120 crore in the ethanol value chain, encouraging ‘Urja-Kheti, which will augment farmer’s income, transform them from ‘annadatas’ (food-providers) to ‘urjadatas’ (energy-providers) and contribute to the overall vision of Aatmanirbhar Bharat.

‘Price of ethanol increased from Rs 39/litre in 2013-14 to Rs 58/litre in 2020-21’

The Ethanol Blending Program (EBP) was started in 2003. Due to progressive, reform-oriented approach and series of steps taken in the last six years, ethanol procurement has gone up from 38 crore litres in sugar year 2013-14, with a value of around Rs 1,500 crore, to an estimated procurement of 325 crore litres in the year 2020-21, with an estimated value of Rs 19,000 crore. 

ALSO READ: Response to last ethanol tender record-high, India on track to achieve 20% blending by 2030: Oil Secretary

The price of ethanol procurement has also gone up from around Rs 39 per litre in sugar year 2013-14 to an average price of Rs 58 per litre in sugar year 2020-21. This progressive increase in prices has helped augment farmers’ income, said Pradhan.

The blending percentage of ethanol in petrol has gone up from 1.53 percent in 2013-14 to 5 percent in 2019-20 and estimated to be 8.5 percent in 2020-21. The government has set up an ambitious target of 10 percent ethanol blending by 2022 and 20 percent ethanol blending by 2030, which will require additional capacity to be added. 

Why is the Cabinet’s decision important?

The modified scheme for extending interest subvention, which was approved by the Cabinet on Wednesday, makes way for the government to bear interest subvention for distilleries for five years, including one-year moratorium against the loan availed by project proponents from banks at 6 percent per annum or 50 percent of the rate of interest charged by banks, whichever is lower. The interest subvention will be extended to only those distilleries which will supply at least 75 percent of ethanol produced from the added distillation capacity to OMCs for blending with petrol.

The Cabinet’s decision will facilitate capacity addition and greater ethanol blending will aid import substitution, savings of foreign exchange and environment sustainability.

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