Cabinet decisions: Sops for grain-based ethanol, nod to clutch of infra projects

Cabinet decisions: Sops for grain-based ethanol, nod to clutch of infra projects

The government would offer the interest subvention of 6% or half the interest rate charged by the banks, whichever is lower.The government would offer the interest subvention of 6% or half the interest rate charged by the banks, whichever is lower.

The Cabinet committee on economic affairs (CCEA) on Wednesday cleared additional interest subsidy of Rs 4,573 crore for establishing ethanol units that will use cereals, instead of the usual practice of using just cane, to produce the bio-fuel. It approved Rs 7,725 crore for creating trunk infrastructure in two industrial areas and for setting up logistic and transport hubs.

Of the Rs 7,725 crore, as much as Rs 3,884 crore will be spent on setting up a multi-modal logistics hub and a multi modal transport hub in Greater Noida.

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Similarly, trunk infrastructure will be created in the Krishnapatnam industrial area in Andhra Pradesh with an estimated cost of Rs 2,139 crore; another Rs 1,702 crore is earmarked for Tumakuru Industrial Area in Karnataka. Taken together, these investments are estimated to generate 2.8 lakh jobs.

The CCEA also approved a project to bolster inner harbour facilities at Paradip Port at a cost of `3,005 crore. The project includes the development of the western dock on build, operate and transfer (BOT) basis under a public-private partnership (PPP) mode to handle cape size vessels at the port.

The decision to offer additional interest subsidy to set up ethanol distilleries comes at a time when the government is planning to boost the blending of the bio-fuel with petrol to cut a glut in sugar and trim oil imports.

“Previously, Rs 4,687 crore interest subvention scheme was approved and now Rs 4,573 crore has been sanctioned,” oil minister Dharmendra Pradhan said. “This decision will fuel investment of about Rs 40,120 crore in the ethanol value chain, boost local industries, generate jobs, give fillip to the economy and encourage ‘urja-kheti, which will transform our ‘annadatas’ into ‘urjadatas’,” Pradhan said.

The government would offer the interest subvention of 6% or half the interest rate charged by the banks, whichever is lower. The subsidy will be for five years, including one-year moratorium against the loan availed by project proponents.

Expanding the scope of an existing scheme, the CCEA decided to include grain-based distilleries to encourage ethanol production from cereals, such as rice, wheat, barley and corn, instead of just cane and sugar beet.

“Interest subvention would be available to only those distilleries that will supply at least 75% of ethanol produced from the added distillation capacity to oil marketing companies for blending with petrol,” the government said in a statement.

The interest subvention would be available for setting up new as well as an expansion of existing molasses or grain-based distilleries and for units that will produce ethanol from other feedstocks such as sugar beet, sweet sorghum and cereals.

Currently, India has a molasses-based ethanol production capacity of 426 crore litres. This capacity is used for supply to both the liquor industry as well as for the blending or doping in petrol.

During 2019-20 ethanol supply year (December 2019 to November 2020), 173 crore litre was procured for blending with petrol. For the current year, the contracted quantity is likely to touch 325 crore litres. This will raise the blending level to 8.5%, against 5% in 2019-20. It marks a huge improvement from the blending levels of just 1.5% in 2013-14.

The government is now targeting to more than double the blending of ethanol in petrol to 20% by 2030. For this, domestic production capacity has to be augmented. The volume will rise to 1,000 litres in 2030 when one-fifth of petrol is targeted to be ethanol, Pradhan said.

For this to happen, ethanol manufacturing capacity has to be raised to 1,750 crore litres, which would require an investment of over Rs 40,000 crore, he added.

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