The is likely to help government advance the deadline for blending 20 per cent ethanol in petrol to 2025 from the earlier announced 2030.
Under the modified scheme notified on Thursday, the government would bear interest subvention for five years including one year moratorium against the loan availed by project proponents from banks at the rate of 6% per annum or 50% of the rate of interest charged by banks whichever is lower.
“This will bring an investment of about Rs. 40,000 crore. It would also facilitate diversion of excess sugar to ethanol and encourage farmers to diversify their crops to cultivate particularly corn which needs lesser water compared to sugarcane and rice,” said a food ministry official.
The official said that the government has already got assurance of supply of 324 crore litres of ethanol for 2020-21 and it expects to achieve 9% blending of ethanol petrol.
He said that the government would be requiring supply of 900 crore litres of ethanol to achieve 20% blending with petrol by 2025. Apart from that 300 crore litres will be needed additionally in chemical and other industrial sector.
“Out of total requirement of 1200 crore litres, 700 crore litres can be supplied by sugar industry and remaining 500 crore litres could be supplied by grain based distilleries,” he said .
The official said that the sugar industry may have to divert 6 million tonnes of surplus sugar to produce 700 crore litres while remaining 500 crore litres can be produced from 12.5 million tonnes of food grains.
“This extra consumption of surplus food grains would ultimately benefit the farmers as they will get better price for their produce and assured buyers; and thus will also increase the income of crores of farmers across the country,” the official said.