Policies of oil marketing firms hampering ethanol output, ISMA tells MPs

‘India has enough raw material to help achieve goal of 20% ethanol blending with petrol, but needs higher production capacity with mills, and better infra, storage at OMCs’

The country has enough raw material to produce 1,016 crore litres of ethanol by 2025 for blending with petrol, but policies of oil marketing companies and other factors are restricting the output of the fuel additive, according to industry body ISMA.

In a presentation before Members of Parliament (MPs), Indian Sugar Mills Association Director General Abinash Verma on Thursday said that about 10% ethanol blending with petrol was expected in the current (2022) year. A target had been set for 20% ethanol blending by 2025.

To achieve the 20% blending target, the ISMA DG said about 1,016 crore litres of ethanol was required, and for which the raw material is available, but there was a need to augment production capacity with mills as well as necessary infrastructure and storage with oil marketing companies (OMCs).

The government had put in place ‘encouraging’ policies for capacity creation, but delay in bank loans is creating hurdles. That apart, OMCs’ policies remain “restrictive”, it said.

The Union Food Ministry has given in-principle approvals to 983 projects since 2018 under interest subvention schemes which have been extended time and again for new investors.

On the other hand, OMCs - which invited bids in August 2021 for additional capacity creation of 648 litres - have approved 131 project proponents for about 400 crore litres in annual capacity.

The ISMA DG said, however, banks were not willing to sanction loans if two conditions were not met: one was the in-principle approval of the Food Ministry; the other was long-term bipartite purchase agreements (BPAs) between OMCs and project proponents.