OMCs' policies hampering ethanol output: ISMA

- Low infrastructure and storage facilities with OMCs

- Delay in bank loan approvals

- Lack of EoI of OMCs for BPAs

- OMCs ignoring sugarcane producing states

- OMCs refrain for long-term purchase agreements

New Delhi: The country has enough raw material to produce 1,016 crore litres of ethanol by 2025 for blending with petrol, but policies of oil marketing companies and other factors are restricting the output of the fuel additive, industry body ISMA said on Thursday.

In a presentation before Members of Parliament (MPs), Indian Sugar Mills Association Director General Abinash Verma said that about 10 per cent ethanol blending with petrol is expected in the current (2022) year. A target has been set for 20 per cent ethanol blending by 2025. To achieve the 20 per cent blending target, the ISMA DG said about 1,016 crore litres of ethanol is required, and for which the raw material is available. But there is a need to augment production capacity with mills as well as necessary infrastructure and storage with OMCs (Oil Marketing Companies). The government has put in place encouraging policies for capacity creation, but delay in bank loans is creating hurdles. That apart, OMCs' policies remain restrictive, it said. The Union food ministry has given in-principle nod to 983 projects since 2018 under interest subvention schemes which have been extended time and again for new investors. On the other hand, OMCs which invited bids in August 2021 for additional capacity creation of 648 litres have approved 131 project proponents for around 400 crore litres of annual capacities.

The ISMA DG said, however, banks are not willing to sanction loans if two conditions are not met. One is in-principle approval of the food ministry, the other one is long-term bipartite purchase agreements (BPAs) between OMCs and project proponents. Thus, only 67 projects are eligible as per the banks' guidelines, he said, adding that some may not be found credit-worthy by banks. Further, there are problems in the Expression of Interest (EoI) of OMCs for BPAs as errors are found in shortlisting projects. OMCs have ignored sugarcane producing states and given large allocations to non-cane producing states like Kerala and Jammu & Kashmir. "OMCs are not signing the long-term purchase agreements with existing ethanol producers and new ethanol plants which are not interested in the concessional loans," the DG said.

To overcome the problem of finances for capacity creation, the ISMA said necessary approvals for bank loans should be given within seven days from the date of application by the companies. "Otherwise, the pace of capacity creation will see a major fall, and achieving 20 per cent ethanol production by 2025 will become extremely difficult," it said. The industry body also said that storage capacities at depots of OMCs across the country need to be augmented. Even the Indian railway network and laying of pipelines will be crucial. "For dispensing higher ethanol blended petrol as also pure ethanol, there is a need for OMCs to make necessary changes at retail pumps/stations," it said. ISMA further said it is crucial to augment demand and use of more ethanol. Therefore, there is a need to launch flexi fuel vehicles as early as possible to achieve 20 per cent ethanol blending by 2025.