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

India has enough feedstock to help achieve the 20% ethanol blending target with gasoline, but needs higher production capacity with factories and better infra storage at OMCs.

India has enough feedstock to help achieve the 20% ethanol blending target with gasoline, but needs higher production capacity with factories and better infra storage at OMCs.

The country has enough raw material to produce 1,016 crore liters of ethanol for blending with gasoline by 2025, but policies of oil marketing companies and other factors restrict production of the fuel additive, according to the industry association ISMA.

In a presentation to MPs (MPs), the director-general of the Indian Sugar Mills Association, Abinash Verma, said on Thursday that about 10% ethanol blending with gasoline is expected in the current (2022) year. A target was set for adding 20% ​​ethanol by 2025.

To meet the 20% admixture target, the ISMA DG said that approximately 1,016 crore liters of ethanol were needed, and for which the feedstock is available, but there was a need to increase production capacity with mills, as well as the necessary infrastructure and storage with oil marketing companies (OMCs).

The government had introduced an ‘encouraging’ policy for capacity building, but the postponement of bank loans is creating hurdles. Beyond that, the OMC’s policies remain “restrictive,” it said.

Since 2018, the Union Ministry of Food has given approval in principle to 983 projects under interest-rate subsidy schemes that have been extended time and again for new investors.

On the other hand, OMCs – which invited bids for additional capacity creation of 648 liters in August 2021 – have approved 131 project proponents for an annual capacity of approximately 400 crore liters.

However, the ISMA DG said that banks were unwilling to penalize loans if two conditions were not met: one was the approval in principle from the Ministry of Food; the others were bipartite long-term purchase agreements (BPAs) between OMCs and project proponents.

So, according to the banks’ guidelines, only 67 projects were eligible, he said, adding that some may not be considered creditworthy by banks.

Furthermore, there are issues with the Expression of Interest (EoI) of OMCs for BPAs as errors are found in shortlisted projects.

OMCs have ignored sugar cane-producing states and given large allocations to non-cane-producing states such as Kerala and Jammu & Kashmir.

“OMCs do not sign long-term purchase agreements with existing ethanol producers and new ethanol plants that are not interested in the concessional loans,” the DG said.

To solve the problem of financing capacity creation, the ISMA said that the necessary approvals for bank loans must be given by the companies within seven days from the date of application.

“Otherwise, the rate of capacity creation will slow sharply and it will become extremely difficult to achieve 20% ethanol production by 2025,” the report said.

The trade association also said that storage capacity in OMC’s depots across the country needed to be increased. Even India’s rail network and pipeline construction would be crucial.

“To deliver blended gasoline with higher ethanol content and also pure ethanol, there is a need for OMCs to make the necessary changes at retail pumps/stations,” it said.

ISMA further said it is crucial to increase the demand and use of more ethanol. Therefore, it was necessary to introduce flexi-fuel vehicles as early as possible to blend 20% ethanol by 2025.

www.thehindu.com

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