India’s Revamped Ethanol Interest Subvention Scheme

Current Affairs National

Posted by newadmin on 2025-03-10 08:42:28 |

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The Government of India has introduced a modified Ethanol Interest Subvention Scheme to enhance the operational viability of Cooperative Sugar Mills (CSMs). This initiative enables sugar mills to convert their existing sugarcane-based ethanol plants into multi-feedstock facilities, allowing the use of grains such as maize and damaged food grains (DFG) alongside sugarcane. The primary objective is to ensure continuous operation and improve productivity throughout the year.

Ethanol production in India has traditionally depended on sugarcane, but the limited crushing period of 4-5 months each year restricts the operational capacity of sugar mills. To address this, the government has encouraged the diversification of feedstocks to maintain consistent production levels. This effort aligns with the Ethanol Blended Petrol (EBP) Programme, which aims for 20% ethanol blending with petrol by 2025.

Under the modified Ethanol Interest Subvention Scheme, the government provides interest subvention at 6% per annum or 50% of the bank interest rate, applicable for loans from banks or financial institutions over five years, including a one-year moratorium. This financial support incentivizes CSMs to expand operations beyond sugarcane-based ethanol production.

By transitioning to multi-feedstock processing, CSMs can maintain ethanol production even during the off-season for sugarcane, ensuring greater efficiency and financial stability. The use of alternative raw materials such as maize and agricultural residues enhances operational flexibility and sustainability. This initiative also reduces the industry's dependence on a single crop, creating more opportunities for farmers and strengthening the agricultural economy.

The government has set ambitious targets for ethanol production, with the EBP Programme playing a crucial role in India’s energy strategy. As of February 2025, the ethanol blending rate reached 19.6%, reflecting significant progress towards the 20% target. Expanding production capabilities through multi-feedstock ethanol plants will be instrumental in achieving this goal.

The modified scheme presents new opportunities for Cooperative Sugar Mills by promoting the use of locally available grains and reducing reliance on sugarcane. This strategic shift is expected to enhance the long-term sustainability of ethanol production while contributing to the overall economic growth of the agricultural sector.

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