MUMBAI – Maharashtra government is considering a proposal to invest in distilleries being set up by sugar mills in the state to convert sugarcane juice to ethanol, a senior government official said today on the condition of anonymity.

Shekhar Gaikwad, the state's sugar commissioner, confirmed that such a proposal is being prepared. He said it is a 30-10-60 project, wherein the state government will contribute 30% of the capital through grants. The parent sugar mill will provide 10%, and the remaining 60% will be raised from banks, he added.

However, the unit should be a standalone distillery converting cane juice directly into ethanol, Gaikwad said.

"The proposal will be presented to the state Cabinet for its approval in the near-term," the government official cited above said.

However, it's up to the Cabinet to decide if government participation would be limited to distilleries set up by sugar mills, or any independent entity would also be entitled to it, another industry official said.

The Centre and state governments are encouraging blending of ethanol with petrol to reduce India's oil import bill, and also to address the glut in the sugar market. The sugar glut has threatened payment schedules to cane farmers and led to a financial crisis in the sugar industry.

In addition to hiking ethanol prices, the government has been encouraging direct conversion of cane juice to ethanol, which will reduce sugar output and increase the earnings of mills. 

The Centre has also provided soft loans to sugar mills to set up ethanol distilleries and expand existing ones to boost production of the by-product.

Production of the sweetener in 2018-19 (Oct-Sep) is seen at a record high 33 mln tn, against 32.2 mln tn last season, according to Indian Sugar Mills Association.