‘India has enough raw material to help achieve 20% ethanol blending target with petrol, but needs higher production capacity with mills and better infrastructure storage in OMCs’
‘India has enough raw material to help achieve 20% ethanol blending target with petrol, but needs higher production capacity with mills and better infrastructure storage in OMCs’
The country has enough raw material to produce 1,016 crore liters of ethanol for blending with petrol by 2025, but policies of oil marketing companies and other factors are restricting production of the fuel additive, according to industry body ISMA.
In a presentation before the Members of Parliament (MPs), Director General of Indian Sugar Mills Association Avinash Verma on Thursday said that around 10% ethanol blending with petrol was expected in the current (2022) year. A target of 20% ethanol blending was set by 2025.
To achieve the 20% blending target, the ISMA DG said that around 1,016 crore liters of ethanol was required, and for which raw material is available but production capacity with mills as well as necessary infrastructure and storage with oil needed to be increased. Marketing Companies (OMCs).
The government had put in place ‘encouraging’ policies for capacity building, but delays in bank credit are creating hurdles. Furthermore, the policies of the OMCs remain “restrictive”, it said.
The Union Food Ministry has given in-principle approval to 983 projects under interest subvention schemes since 2018 which have been repeatedly extended to new investors.
On the other hand, OMCs – which invited bids for an additional capacity building of 648 liters in August 2021 – have approved 131 project supporters for about 400 crore liters in annual capacity.
The Director General of ISMA said, however, that banks were not ready to sanction loans if two conditions were not met: one was the Food Ministry’s in-principle approval; The second was the long-term Bilateral Purchase Agreements (BPAs) between the OMCs and the project supporters.
Thus, only 67 projects were eligible as per the guidelines of the banks, they said, adding that some may not be found creditable by the banks.
Besides, there are problems in the Expression of Interest (EoI) of OMCs for BPAs as errors are found in shortlisting the projects.
The OMCs have neglected sugarcane producing states and given huge allocations to non-sugarcane growing states like Kerala and Jammu and Kashmir.
“OMCs are not signing long-term purchase agreements with existing ethanol producers and new ethanol plants, which are not interested in concessional credit,” the DG said.
To address the problem of finance for capacity building, ISMA said that necessary approvals for bank loans should be given by companies within seven days from the date of application.
“Otherwise, a major drop in the pace of capacity building will be observed, and achieving 20% ethanol production by 2025 will become extremely difficult,” it said.
The industry body also said that there is a need to increase the storage capacity at OMC’s depots across the country. Even laying the Indian Railways network and pipeline will be important.
“For distribution of high ethanol blended petrol as well as pure ethanol, OMCs are required to make necessary changes at retail pumps/stations,” it said.
ISMA further said that it is important to increase the demand and use of more ethanol. Therefore, there was a need to introduce flexi-fuel vehicles at the earliest to achieve 20% ethanol blending by 2025, it said.