NATIONAL

Ethanol production gets a leg-up

Some relief:Record harvests and sugar recovery have caused a glut in sugar production and brought the prices down.  

In a bid to boost sugar mills’ ethanol-production capacity and help them pay off mounting arrears to cane farmers, the Union government has approved Rs. 3,355 crore in incentives. The Cabinet Committee on Economic Affairs (CCEA) made the decision on Thursday at what is likely to be its last meeting before the Lok Sabha election is announced.

The CCEA has approved Rs. 2,790 crore for bank loan interest subvention to mills, and Rs. 565 crore for loan interest subvention to the molasses-based standalone distilleries.

Banks will be able to extend soft loans worth Rs. 15,500 crore to mills and distilleries under the scheme. This is likely to benefit 268 mills and create an additional 300-400 crore litres of ethanol capacity, according to industry estimates.

Record harvests and sugar recovery have caused a glut in sugar production and brought the prices down. Cash-starved mills owe farmers more than Rs. 22,000 crore in arrears for the current season, with almost half the sum owed to farmers in the politically significant parts of Uttar Pradesh.

Last June, the ruling BJP lost a crucial byelection in Kairana, in the heart of Uttar Pradesh’s cane country. The defeat was perceived as the result of farmers’ anger. The enhancement of ethanol capacity could help divert surplus cane from sugar production, thus reducing inventories and bringing in revenue to mills. Improved liquidity would help them pay off their dues.