Cabinet approves modified scheme to enhance ethanol distillation capacity 

Cabinet approves modified scheme to enhance ethanol distillation capacity 

Part of: GS Prelims and GS-III – Infrastructure; Environment; Agriculture

In news 

Background 

• There has been surplus production of sugar in the country since sugar season 2010-11. 

• Sugar production is likely to remain surplus in India in coming years due to introduction of improved varieties of sugarcane.

• To deal with surplus stocks of sugar, sugar mills have been exporting sugar, for which Government has been extending financial assistance.

• India being a developing country can export sugar by extending financial assistance only up to year 2023 as per WTO arrangements.

• So, diversion of excess sugarcane & sugar to ethanol is a correct way forward to deal with surplus stocks.

Key takeaways 

• Thus, recently Cabinet has approved modified scheme to enhance ethanol distillation capacity. 
• Diversion of excess sugar would help in stabilizing the domestic ex-mill sugar prices. 
• It will also help sugar mills to get relieved from storage problems. 
• It will improve their cash flows and facilitate them in clearance of cane price dues of farmers. 
• Government has fixed target of 10% blending of fuel grade ethanol with petrol by 2022, 15% blending by 2026 & 20% blending by 2030. 
• With a view to support sugar sector and in the interest of sugarcane farmers, the Government has also allowed production of ethanol from B-Heavy Molasses, sugarcane juice, sugar syrup and sugar. 
• To increase production of fuel grade ethanol, Govt. is also encouraging distilleries to produce ethanol from maize; & rice available with FCI.
• Government has fixed remunerative price of ethanol from maize & rice.
• Government is also planning to prepone achievement of 20% blending target by year 2025 and onwards.
• With increase in blending levels, dependence on imported fossil fuel will decrease and will also reduce the air pollution.

Also, the Government has taken following decisions:

• To bring a modified scheme for extending interest subvention to augment ethanol production capacity. 
• Government would bear interest subvention for five years including one year moratorium against the loan availed by project proponents from banks at 6% per annum or 50% of the rate of interest charged by banks whichever is lower.

• Interest subvention would be available to only those distilleries which will supply at least 75% of ethanol produced to Operations Management & Control System (OMCs) for blending with petrol.

Do you know? 

• Proposed intervention would enhance production of 1G ethanol from various feed stocks thereby, facilitate in achieving blending targets of ethanol with petrol. 
• It would promote ethanol as a fuel which is indigenous, non-polluting and virtually inexhaustible. 
• It would improve the environment and the ecosystem and result in savings on Oil Import Bill.  
• It will also ensure timely payment of dues to farmers.