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Only 7% of sum cleared for ethanol projects disbursed

Cogencis, Thursday, Feb 14

By Preeti Bhagat and Stuti Chawla

NEW DELHI – Banks have disbursed only 4 bln rupees of the 61.4-bln-rupee soft loan approved by the government to help sugar mills boost ethanol production, a senior government official said.

As part of an incentive scheme announced in June to bail out sugar mills, the government had approved an interest subvention of up to 13.32 bln rupees, along with a one-year moratorium on loan repayment, for setting up new distilleries, expanding capacity and upgrading existing distilleries, and to encourage mills to divert cane to ethanol.

Of the total 256 applications received by the government for addition and expansion of distillery capacity, 114 were approved in September. Only a handful of mills from the approved applicants qualify for bank loans as most of them do not have healthy balance sheets, the official said.

The industry, however, blames the government's arbitrary policies for approving ethanol projects eligible for soft loans, for the mess.

Mills with healthy balance sheets were not allowed to claim interest subvention due to pending liabilities and failure to meet old government diktats, which has put many projects on hold, an industry official said.

According to industry estimates, diversion of sugarcane as well as sugar-rich B-heavy molasses to ethanol lowered sugar output by about 500,000 tn this year.

The government has taken a number of initiatives to help mills divert cane and molasses to ethanol and reduce sugar production this season, as India's supply is pegged at a record 42.0 mln tn, much higher than annual consumption of 25.5-26.0 mln tn.

High supplies have depressed sugar prices, making it difficult for mills to make cane payments on time. Indian Sugar Mills Association has pegged cane arrears at 200 bln rupees as at the end of January, and said the figure could jump to a record high 220 bln rupees by April.

Around 13% of mills' average revenue realisation this year is from ethanol. The government has announced higher prices for ethanol to encourage mills to use B-heavy molasses from which sugar has been extracted only once, as well as 100% concentrated cane juice, to manufacture ethanol.

Oil marketing companies have signed contracts to purchase 2.59 bln ltr of ethanol in 2018-19 (Nov-Dec), of which 492.2 mln ltr is derived from B-heavy molasses, and 21 mln ltr is ethanol made directly from sugarcane juice.  End

Edited by Akshit Harsh

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