Ethanol Blending

Ethanol Blending

Subject: Economy

Section: Fiscal Policy

Why in the news?

The Centre has invited fresh applications from those who have acquired land for ethanol project and obtained environmental clearance to avail interest subvention in setting up new distilleries or expansion of existing distilleries to produce ethanol out of cereals (rice, wheat, barley, maize and sorghum), sugarcane (including sugar, sugar syrup, sugarcane juice, B-heavy molasses, Chevy molasses) and sugar beet.

Details

Interest Subvention Scheme: For ethanol production, expanding the scheme to include grain-based distilleries and not just molasses-based ones.

• The scheme would boost production and distillation capacity to 1,000 crore litres and help in meeting the goal of 20% ethanol blending with petrol by 2030.
• The government has been extending financial assistance in the form of interest subvention at six per cent per annum or 50 per cent of rate of interest charged by banks, whichever is lower, on the loans to be extended by banks for five years including one-year moratorium.

Interest Subvention Scheme for farmers

• The interest subvention scheme was introduced in 2006-07 with the view of providing concessional credit to farmers.
• This will help farmers getting short term crop loans up to Rs. 3 lakh payable within one year at only 4% per annum.
• The Interest Subvention Scheme will continue for one year and it will be implemented by NABARD and RBI
• The interest subvention will be given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks and Regional Rural Banks (RRBs) on use of own funds and to NABARD for refinance to RRBs and Cooperative Banks.

The Ethanol Blending Programme (EBP) seeks to achieve blending of Ethanol with motor spirit with a view to reducing pollution, conserving foreign exchange and increasing value addition in the sugar industry enabling them to clear cane price arrears of farmers.

The Union government has fixed a target of 10 per cent blending of fuel grade ethanol with petrol by 2021-22 and 20 per cent by 2024-25.