Enhancing Ethanol Production in Cooperative Sugar Mills
Context:
The Government of India has notified a modified Ethanol Interest Subvention Scheme for Cooperative Sugar Mills (CSMs) to enhance ethanol production. The scheme allows the conversion of existing sugarcane-based ethanol plants into multi-feedstock-based plants, enabling the use of maize and Damaged Food Grains (DFG). The initiative aligns with the Ethanol Blended Petrol (EBP) Programme, which aims for 20% ethanol blending with petrol by 2025.
Rationale for the Scheme
- Sugar mills operate for only 4-5 months annually due to the limited sugarcane crushing period, leading to reduced operational efficiency.
- To enhance the financial viability and year-round operation of CSMs, conversion to multi-feedstock-based plants is encouraged.
- Multi-feedstock plants will ensure continuous ethanol production, improving efficiency and productivity.
Key Features of the Scheme
- Interest subvention of 6% per annum or 50% of the rate of interest charged by banks/financial institutions (whichever is lower).
- The Central Government bears the interest on loans for five years, including a one-year moratorium.
- The scheme was earlier applicable only to private sugar companies but has now been extended to cooperative sugar mills.
- The scheme benefits approximately 63 cooperative sugar mills with attached distilleries.
Financial Implications
- Loans for conversion projects will be subsidised, making borrowing more affordable.
- Cooperative mills, primarily borrowing from the National Cooperative Development Corporation (NCDC) at 8.5% interest, will now have an effective interest rate of around 4.25%.
- Estimated investment per sugar mill for conversion is ₹50-60 crore, ensuring smooth capital infusion.
Impact of the scheme
- On Ethanol Production and Economy
- Enhances ethanol supply to meet the EBP Programme’s 20% target.
- Reduces dependence on sugarcane and promotes diversification of raw materials.
- Improves the economic viability of cooperative sugar mills, allowing them to operate for 2-3 months longer.
- Strengthens India’s biofuel economy, reducing fossil fuel dependency and enhancing energy security.
- Broader Environmental and Economic Benefits
- Sustainable Use of Resources: Utilises damaged food grains that would otherwise go to waste.
- Reduces Carbon Emissions: Ethanol blending decreases greenhouse gas emissions.
- Boosts Rural Economy: Supports farmers and rural industries by creating demand for alternative crops like maize.
- Energy Security: Aligns with India’s biofuel policy and reduces reliance on imported crude oil.
Challenges and the Way Forward
- Challenges:
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- Logistics and Infrastructure: Adapting distilleries for multi-feedstock production requires technological upgrades.
- Raw Material Availability: Ensuring a stable supply of maize and DFG without disrupting food security.
- Implementation Hurdles: Timely disbursal of loans and compliance with regulatory frameworks.
- Way Forward:
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- Strengthening Supply Chains: Developing a robust procurement network for alternative feedstocks.
- Capacity Building: Training sugar mill operators in multi-feedstock processing.
- Policy Coordination: Ensuring alignment with food security policies and ethanol blending mandates.
- Public-Private Collaboration: Encouraging investments in ethanol infrastructure through public-private partnerships (PPPs).
Conclusion
The modified Ethanol Interest Subvention Scheme is a strategic move towards sustainable ethanol production. It ensures the financial stability of cooperative sugar mills, supports biofuel expansion, and contributes to India’s energy security goals. Addressing implementation challenges will be key to maximising benefits for the economy, environment, and rural communities.
Ethanol Interest Subvention Scheme (Ethanol Blended Petrol Program – EBP)
The Ethanol Interest Subvention Scheme is a key initiative under India’s Ethanol Blended Petrol (EBP) Program, aimed at boosting domestic ethanol production to reduce dependence on imported crude oil and enhance farmer incomes.
Key Features of the Scheme
- Objective:
- Promote ethanol production capacity to meet the Ethanol Blending Target (India aims for 20% ethanol blending (E20) by 2025-26).
- Ensure an adequate supply of ethanol for the blending program while reducing carbon emissions.
- Support farmers by diverting excess sugarcane, broken rice, and maize into ethanol production.
- Financial Assistance (Interest Subvention):
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- Interest subvention of up to 6% per annum or 50% of the interest rate on loans taken for ethanol production projects.
- Subsidy is provided for 5 years, including a 1-year moratorium.
- The scheme is implemented through public sector banks, private banks, and cooperative banks.
- Eligibility & Scope:
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- Sugar mills, distilleries, cooperative societies, and entrepreneurs setting up new or expanding ethanol production facilities.
- Loans are provided for:
- Setting up new ethanol plants.
- Expansion and modernisation of existing ethanol distilleries.
- Conversion of molasses-based distilleries into dual-feed plants (which can also use grains like maize & rice).
- Raw Materials Covered:
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- Sugarcane juice/syrup
- B-heavy & C-heavy molasses
- Damaged food grains (broken rice, maize)
- Surplus rice from Food Corporation of India (FCI)
- Implementation & Monitoring:
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- The Department of Food & Public Distribution (DFPD) under the Ministry of Consumer Affairs, Food & Public Distribution is the nodal agency.
- The scheme is part of the National Bio-Energy Mission and aligned with the National Policy on Biofuels (2018).
- Oil Marketing Companies (OMCs) procure ethanol from distilleries at government-fixed rates
