India extends ethanol distillery loan support

India's government has sanctioned financial support for a further 185 ethanol projects, aiming to boost domestic capacity by 3.7mn t/yr with their completion.

These additions will bring the total capacity supported under the federal ethanol loan subvention scheme to 5.2mn t/yr, as the government increases efforts to hit a 20pc ethanol blending mandate ahead of its initial 2030 target.

The government opened a 30-day window this year for applications during 15 September-15 October, after the first round of projects were approved in June 2018.

The scheme grants sugar mills, distilleries and entrepreneurs five years of interest aid against loans for expanding molasses-based ethanol distilling capacity, on interest rates of up to 6pc. The projects most recently granted support will likely come on line in 3-4 years, said the ministry of consumer affairs, food and public distribution when it announced the approvals on 20 November.

Projects adding 805,000 t/yr in output capacity have already been completed with support from the scheme over the past two years. The programme now covers 161bn rupees ($2.2bn) worth of loans.

The government sees ethanol blending with gasoline as a key to reducing dependency on crude imports, drawing down its 6mn t/yr sugar glut and increasing liquidity along the sugar supply chain.

Government efforts including lifting ethanol prices have yielded increased supplies for the December 2020-November 2021 supply year. Oil refining and marketing firms received bids totalling 2.5mn t in response to an initial tender, said the ministry, closing in on a 2.6mn t target that will bring the blending rate up to 8.5pc in 2020-21. Just 1.3mn t is expected to be blended in the current 2019-20 ethanol supply year, achieving a 4.8pc ratio.

India does not allow fuel-grade ethanol imports for blending.

By Lauren Moffitt