Policies by oil marketing firms are hampering ethanol production, ISMA tells MPs


“India has enough raw material to meet the target of 20% ethanol blending with gasoline, but needs higher production capacity with mills and better infrastructure, storage at OMCs.”

“India has enough raw material to meet the target of 20% ethanol blending with gasoline, but needs higher production capacity with mills and better infrastructure, storage at OMCs.”

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

In a presentation to Members of Parliament (MPs) on Thursday, Indian Sugar Mills Association Director General Abinash Verma said that in the current year (2022) around 10% ethanol is expected to be blended into gasoline. A target for 20% ethanol blending by 2025 has been set.

In order to achieve the 20% blending target, ISMA DG said that about 1,016 million liters of ethanol are required and for which the raw material is available, but it is necessary to expand the production capacity with mills, as well as the necessary infrastructure and storage of oil marketing companies ( OMC’s).

The government had introduced “encouraging” capacity-building measures, but delays in bank lending create hurdles. That said, the OMCs’ policy remains “restrictive.”

Since 2018, the Union Ministry of Food has approved 983 projects in principle under interest subsidy programs, which have been repeatedly renewed for new investors.

On the other hand, the OMCs – which in August 2021 tendered bids for the additional capacity creation of 648 liters – have approved 131 project proponents for about 400 million liters of annual capacity.

However, ISMA-GD said banks would not be willing to sanction loans unless two conditions were met: one was approval in principle by the Ministry of Food; the other was long-term bilateral purchase agreements (BPAs) between OMCs and project promoters.

Therefore, only 67 projects are eligible under banks’ guidelines, he said, adding that some may not be deemed creditworthy by banks.

In addition, there are problems with the OMCs’ Expression of Interest (EoI) for BPAs, as errors are found in the selection of projects.

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

“OMCs will 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.

In order to solve the financing problem for capacity building, ISMA said that the necessary approvals for bank loans should be granted within seven days from the date of companies’ application.

“Otherwise, the pace of capacity building will drop sharply, and achieving 20% ​​ethanol production by 2025 will be extremely difficult,” it said.

The industry association also said that storage capacity in depots owned by OMCs across the country needed to be increased. India’s railway network and the laying of pipelines would also be crucial.

“In order to dispense gasoline with a higher ethanol content as well as pure ethanol, the OMCs must make the necessary changes to the fuel stations/dispensers,” it said.

ISMA went on to say it is critical to increase demand and use of more ethanol. It is therefore necessary to introduce flexi-fuel vehicles as early as possible in order to achieve a 20% ethanol blend by 2025, it said.

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