Scheme To Enhance Ethanol Distillation Capacity

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Logic of the scheme 

  • Diversion of excess sugarcane & sugar to ethanol is a correct way forward to deal with surplus stocks.
  • Diversion of excess sugar would help in stabilizing the domestic ex-mill sugar prices and 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; and will facilitate mills to function in the coming years.


Government targets in Ethanol blending 

  • 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; and has been fixing the remunerative ex-mill price of ethanol derived from C-heavy molasses, B-heavy molasses and ethanol derived from sugarcane juice/ sugar/ sugar syrup for ethanol season.


Recently Government has taken following decision.

1. To bring a modified scheme for extending interest subvention to augment ethanol production capacity for following categories:

  • Setting up grain based distilleries / expansion of existing grain based distilleries to produce ethanol. However, benefits of interest subvention scheme to be extended to only those stand alone distilleries which are using dry milling process.
  • Setting up new molasses based distilleries / expansion of existing distilleries (whether attached to sugar mills or standalone distilleries) to produce ethanol and for installing any method approved by Central Pollution Control Board for achieving Zero Liquid Discharge (ZLD).
  • To set up new dual feed distilleries or to expand existing capacities of dual feed distilleries.
  • To convert existing molasses based distilleries (whether attached to sugar mills or standalone distilleries) to dual feed (molasses and grain/ or any other feed stock producing 1G Ethanol); and also to convert grain based distilleries to dual feed.
  • To set up new distilleries / expansion of existing distilleries to produce ethanol from other feed stocks producing 1G ethanol such as sugar beet, sweet sorghum, cereals etc.
  • To install Molecular Sieve Dehydration (MSDH) column to convert rectified spirit to ethanol in the existing distilleries.

2. Government would bear interest subvention for five years including one year moratorium against the loan availed by project proponents from banks @ 6% per annum or 50% of the rate of interest charged by banks whichever is lower.


3. Interest subvention would be available to only those distilleries which will supply at least 75% of ethanol produced from the added distillation capacity to OMCs for blending with petrol.


Source : PIB

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