The molasses desugarization process is seen through a vat window. (Photographer: Oliver Bunic/Bloomberg)

Government Mulls Additional Rs 7,400 Crore Soft Loan To Sugar Mills

The government is considering an additional soft loan of Rs 7,400 crore to sugar mills for creating ethanol capacity under a recently launched scheme, according to sources.

The food ministry is also considering tweaking the scheme to ensure that non-molasses-based distilleries are also able to avail soft loans under the scheme launched in June for expansion and setting up of new ethanol plants.

The government had announced a soft loan of Rs 4,400 crore and provided an interest subvention of Rs 1,332 crore to mills over a period of five years, including a moratorium period of one year under the scheme.

However, the ministry has received 282 applications seeking Rs 13,400 crore soft loans. Out of this, 114 applications for a loan amount of Rs 6,000 crore has been approved, the sources said. The subsidy burden would be Rs 1,600 crore for the balance loan amount, they added.

A proposal is being prepared to seek approval for additional soft loan under the scheme as well as amend the rules to allow even grain-based distilleries take the benefits, the sources added.

Currently, molasses-based distilleries are allowed under the scheme. The entry of standard distilleries will help diversion of more cane during surplus season.

Ethanol extracted from sugarcane will be used for blending in petrol and will provide cane farmers a remunerative price for their crop. Ethanol doping in petrol will also help the country cut its oil imports.

India, the world's second biggest producer, is likely to produce 31.5 million tonnes of sugar in 2018-19 marketing year, slightly lower than 32.5 MT last year, according to industry body Indian Sugar Mills Association's forecast.

Also read: India Sugar Production Set to Reach Record on Higher Yields