The Central Government has granted permission to 85 sugar mills and 100 molasses-based standalone distilleries for capacity addition of about 468 crore litres per annum under the ethanol interest subvention scheme for molasses-based distilleries. It is likely that these projects would be completed in another 3-4 years, thus help in achieving the desired blending target.
In the normal sugar season, about 320 lakh tonnes of sugar is produced against domestic consumption of 260 lakh tonnes. This 60 lakh tonnes of surplus sugar, which remains unsold, blocks funds of sugar mills to the tune of about Rs. 19,000 crore every year, thereby affecting liquidity positions of sugar mills resulting in accumulation of cane price arrears of farmers.
As a long term solution to deal with surplus sugar, to improve the sustainability of sugar industry and to ensure timely payment of cane dues to farmers, the government has been encouraging diversion of excess sugarcane and sugar to ethanol for supplying to oil marketing companies for blending with petrol which not only would reduce import dependency on crude oil, promote ethanol as a fuel which is indigenous and non-polluting, but will also enhance the income of sugarcane farmers.
Earlier, the government had fixed a target of 10 % blending of fuel-grade ethanol with petrol by 2022 and 20 % blending by 2030 but it is preparing a plan to advance the achievement of 20 % blending target. However, the existing distillation capacity in the country is not sufficient to produce ethanol to achieve blending targets. So the government is encouraging sugar mills, distilleries and entrepreneurs to set up new distilleries or expand their existing distillation capacities. Efforts are also being made to produce ethanol from maize in States which have sufficient production of maize.