Context:
The Centre notifies a scheme allowing cooperative sugar mills to access subsidised loans for upgrading ethanol distilleries to dual-feed units. The move is expected to benefit 63 cooperative sugar mills with attached distilleries. Ethanol production can now use grains and corn, alongside traditional molasses-based production.
Loan Subsidy Details
- Cooperative sugar mills will get a 50% interest subvention on project loans or 6%—whichever is lower.
- The subsidy is applicable for five years, including a one-year moratorium.
- Impact on borrowing costs:
- Most cooperative mills secure loans through National Cooperative Development Corporation (NCDC), which charges ~8.5% interest.
- Effective interest rate after subvention: ~4.25%.
- For a ₹200 crore loan, this is a highly attractive rate, said Prakash Naiknavare, MD, National Federation of Cooperative Sugar Factories.
Economic & Operational Impact
- The move extends distillery operations by 2-3 months, beyond the usual 4-5 month molasses supply window.
- Investment requirement:
- Converting molasses-based distilleries into dual-feed units requires ₹50-60 crore per plant.
- With lower interest rates, investments will be smoother.
- Until now, only private sugar companies had access to similar incentives.
Ethanol Blending & Future Prospects
- The scheme aligns with the Ethanol Blending Program (EBP), helping India achieve higher ethanol production targets.
- Diversifying feedstock will reduce dependence on sugarcane and ensure year-round ethanol production.
- Strengthens India’s energy security and promotes the biofuel economy.
The scheme marks a major policy shift, supporting cooperative sugar mills and reinforcing India’s ethanol strategy.
Source: BS
