Of 417 applications, just 37 mills get bank loans for ethanol production

Nanda Kasabe

A review meeting organised by the Standing Committee for Monitoring and Expediting Ethanol Production & Capacity has revealed that banks have disbursed loans to barely 37 mills for addition and expansion of distillery capacity for ethanol production. Originally, the Centre had received 417 applications from sugar mills across the country for ethanol production and expansion, said top industry representatives who were present in the meeting.

As part of an incentive scheme announced in June 2018, the Centre had approved soft loans for mills to set up new distilleries or upgrade existing ones, expand capacity, and encourage them to divert cane to ethanol. The total scheme was for Rs 18,643 crore, of which the interest subvention announced by the government came up to Rs 405 crore.

The Committee is led by Joint Secretary, Sugar with members including Joint Secretary, Refineries, Joint Secretary, Agriculture Credit, among others. Indian Sugar Mills Association (Isma) and the National Federation of Cooperative Sugar Factories (NFCSF) were part of the meeting. Of the 417 applications, 362 mills received in-principle approval from the Union food ministry for production of 603 crore litres, said Prakash Naiknavare, MD, NFCSF, adding that these mills had to then individually approach banks for loans.

Of the 362 mills that got in-principle approval, only 96 approached banks, of which 56 mills received sanctions and finally loans worth Rs 154 crore were disbursed only to 37 mills, he said. So far, 8 projects have been completed and 16.5 crore litres have been produced, he pointed out, stating that this presents a very dismal picture of the industry. In Maharashtra, around 42 mills submitted applications, of which 12-14 were approved for loans and 4 mills have finally received loans worth Rs 212 crore, he said. Officials pointed out that the balance sheet of several mills were unhealthy and therefore the banks rejected their proposals. In case of Maharashtra, the state Excise Department had sought queries from mills before granting permission which delayed the process.

Further, the balance sheet of several mills was unhealthy, therefore the banks refused to sanction loans, officials revealed. Naiknavare pointed out that in the meeting held in December 2019 in Mumbai, officials from National Bank for Agriculture and Rural Development (Nabard) had agreed to take up the issue with banks and the millers across the table and come up with a solution. Over 1.5 months have passed since and therefore the issue was brought up again at the meeting in Delhi, Naiknavare said. The Department of Financial Services (DFS) has now agreed to take up this subject and organise the meeting with Nabard, he said.

He added that the Union food ministry is holding meetings with industry leaders, banks, and some sugar mills, and monitoring its progress in consultation with the finance ministry. The ministry has also sought mill-wise details and has asked both the federation and Isma to submit the exact problems the mills were facing in getting loans. Usually, mills should get loans within a year of the Centre's in-principle approval but the delay in loan disbursal by banks forced the government, in November, to extend the disbursement period by six months to a year-and-a-half.

Isma has pegged the country's closing stock at a record-high of 145.8 lakh tonne for 2018-19 (October-September). Production is estimated at 268.5 lakh tonne, of which 850,000 tonne is expected to be diverted to ethanol. For 2019-20 (December-November), the government has increased the price of ethanol made from B-heavy molasses to Rs 54.27 a litre from Rs 52.43 a litre in 2018-19, and that of ethanol made from 100% cane juice and C-heavy molasses to Rs 59.48 a litre and Rs 43.75 a litre, respectively.