In an attempt to expedite the process of addition and expansion of distillery capacity for ethanol production, the industry has asked banks to look at the green fuel as a separate entity to disburse loans, a senior government official said.
Banks are unwilling to give loans to sugar mills for expansion of distillery capacities due to their unhealthy balance sheets.
The Government Has Asked The NABARD To Call An Immediate Meeting With Banks And Sugar Mills To Look Into The Matter.
"Ethanol should be treated as a separate entity as far as finance documents are considered...as in cooperative sugar mills in Maharashtra have negative balance sheets. The moment banks see negative, whole thing stops there," said Managing Director of the
National Federation of Cooperative Sugar Factories Prakash Naiknavare.
The suggestion was made at a meeting held at the food ministry to monitor the progress of the ethanol scheme in consultation with the finance ministry. The meeting was attended by industry organisations, banks, and some sugar mills.
As part of an incentive scheme announced in June 2018, the Centre had approved soft loans for mills to set up new distilleries or upgrade existing ones, expand capacity, and encourage them to divert cane to ethanol. Though the food ministry gave an
in-principle nod to 114 applications, loans have been sanctioned to only 57 mills, and disbursed to 37 mills so far.
The government has asked the National Bank for Agriculture and Rural Development to call an immediate meeting with banks and sugar mills to look into the matter.
The industry has also sought signing of a tripartite agreement between sugar mills, oil marketing companies and banks, while NABARD has been asked to work on the modalities, the government official said.
As per the tripartite agreement, oil marketing companies will have to assure mills that they will purchase whatever ethanol is produced at the government-mandated price, and sugar mills will have to agree that the amount received on sale of ethanol will go to an escrow account and from there directly to bank accounts against which loans were availed.
"Banks will also have to agree to this arrangement of a tripartite agreement... The whole (ethanol) scheme is likely to collapse if NABARD doesn't intervene," Naiknaware said.
For 2019-20 (Dec-Nov), the government has increased the price of ethanol made from
B-heavy molasses to 54.27 rupees a ltr from 52.43 rupees a ltr in 2018-19, and that of ethanol made from 100% cane juice and C-heavy molasses to 59.48 rupees a ltr and 43.75 rupees, respectively.
The government has also allowed oil marketing companies to buy ethanol made from sugar syrup at a similar price as that of ethanol made from cane juice.
The government aims to double the country's ethanol production capacity in the next two-three years from the current 3.55 bln ltr. In 2018-19, mills supplied only 1.88 bln ltr to oil marketing companies.
For 2019-20, oil companies have floated a tender to purchase 5.11 bln ltr ethanol from sugar mills.