- The National Biofuel Policy 2018 envisages an indicative target of 20% blending of ethanol in petrol and 5% blending of biodiesel in diesel by 2030.
- However, as the existing ethanol distillation capacity in the country is not sufficient to produce ethanol to achieve blending targets, the Government is encouraging sugar mills, distilleries and entrepreneurs to set up new distilleries and to expand their existing distillation capacities.
Ethanol interest subvention scheme
- Under the Ethanol interest subvention scheme, to promote setting up of molasses-based distilleries, the government is extending financial assistance by way of interest subvention for 5 years, including a one-year moratorium against the loan availed by project proponents from banks, at 6% per annum or 50% of the rate of interest charged by banks whichever is lower.
- Interest subvention is available to only those distilleries that supply at least 75% of ethanol produced from the added distillation capacity to oil marketing companies (OMCs) for blending with petrol.
Why in News?
- The Union Government announced that it is expecting that ethanol distillation capacities would be doubled by 2025 and the country would be able to achieve a 20 per cent blending target.
- To ensure enough supply of ethanol, the government said it is encouraging ethanol production from grains as well and has allocated 78,000 tonnes of rice from the state-run Food Corporation of India (FCI) at a subsidised rate of Rs 20/kg to distilleries for the current marketing year ending November.
- Recently, Prime Minister Narendra Modi presented a road map advancing the target date for achieving 20% blending of ethanol in petrol by five years to 2025. The last two years have seen blending levels of around 5%, which is likely to jump to 8.5% in the current year.
- The target would enhance production of ethanol from various feedstocks. It would promote ethanol as a fuel which is indigenous, non-polluting and virtually inexhaustible.
- It would improve the environment and the eco-system and result in savings on the Oil Import Bill. It will also ensure timely payment of dues to farmers.
- Biofuels are liquid or gaseous fuels produced from biomass that are generally high in sugar (such as sugarcane, sugarbeet, sweet sorghum), starch (such as corn and cassava) or oils (such as soybeans, rapeseed, coconut, sunflowers, and palms). The two most commonly used biofuels are ethanol and biodiesel.
- Pradhan Mantri JI-VAN Yojana: It provides Viability Gap Funding (VGF) to Second Generation ethanol manufacturing projects to increase availability of ethanol for ethanol blending programme.
- Categories of Biofuels:
- First generation Biofuels are mainly produced from food crop feedstock, such as oil, sugar and starch crops, thus competing for agricultural areas used for food production.
- Second generation Biofuels differ in feedstock which, in this case, comes from non-food plants such as agricultural crops, residues and wood (so-called lignocellulosic biomass).
- Third generation Biofuels are produced from micro-organisms like algae. Its production is supposed to be low cost and high-yielding – giving up to nearly 30 times the energy per unit area as can be realized from current, conventional ‘first-generation’ biofuel feedstocks.
- Fourth generation Biofuels use genetically modified (GM) algae to enhance biofuel production. Key to the process is the capture and sequestration of CO2, a process that renders fourth-generation biofuels a carbon negative source of fuel.
How ethanol production helps the sugar industry?
- There has been surplus production of sugar in the country since sugar season 2010-11 (except reduction due to drought in sugar season 2016-17); & sugar production is likely to remain surplus in the country in coming years due to introduction of improved varieties of sugarcane.
- This surplus sugar puts pressure on domestic ex-mill prices of sugar. The excess stocks which remain unsold also block funds of sugar mills to the tune of about Rs. 19,000 crore thereby affecting liquidity positions of sugar mills resulting in accumulation of cane price arrears of farmers.
- Diversion of excess sugarcane & sugar to ethanol is a correct way forward to deal with surplus stocks. Diversion of excess sugar would help in stabilizing the domestic ex-mill sugar prices and will also help sugar mills to get relieved from storage problems. It will improve their cash flows and facilitate them in clearance of cane price dues of farmers; and will facilitate mills to function in the coming years.