Context: The Department of Food and Public Distribution has notified a modified scheme for extending financial assistance for expansion of ethanol distillation capacity. 

Background: The Government has a fixed target of 10% blending of fuel grade ethanol with petrol by 2022 & 20% blending by 2030. It aims 

  • to boost agricultural economy, 
  • to reduce dependence on imported fossil fuel, 
  • to save foreign exchange on account of crude oil import bill & to reduce the air pollution

About the scheme:

  • Aims: To achieve 20% blending by 2025 as well as to meet out the requirement of ethanol production capacity in the country. The scheme aims for extending financial assistance to project proponents for 
    • enhancement of their ethanol distillation capacity or 
    • to set up distilleries for producing 1st Generation (1G) ethanol from feed stocks such as cereals (rice, wheat, barley, corn & sorghum), sugarcane, sugar beet etc. or 
    • converting molasses based distilleries to dual feedstock.
  • Requirement of Ethanol: Out of total requirement of 1200 crore liters, 700 crore liters is required to be supplied by sugar industry & another 500 crore liters need to be supplied by grain based distilleries. 
  • Supporting the sugar industry: The Government has also allowed production of ethanol from B-Heavy Molasses, sugarcane juice, sugar syrup and sugar.
  • Maize production: Govt. is also encouraging distilleries to produce ethanol from maize; & rice available with Food Corporation of India.
  • Interest subvention: The Government would bear interest subvention for five years including one year moratorium against the loan availed by project proponents from banks @ 6% per annum or 50% of the rate of interest charged by banks whichever is lower.


  • This will bring an investment of about Rs. 40,000 crore. 
  • Due to upcoming investment in capacity addition / new distilleries, various new employment opportunities will be created in rural areas.
  • Facilitate diversion of excess sugar to ethanol
  • Enhancing income of farmers as setting up of new distilleries would not only increase demand of their crops but would assure farmers of getting better price for their crops.
  • Encourage farmers to diversify their crops to cultivate, particularly maize/corn, which need less water than sugarcane and rice.
  • It would enhance production of ethanol from various feedstocks, thereby, facilitating blending targets of ethanol with petrol.
  • It would reduce import dependency on crude oil, thereby, realising the goal of Atmanirbhar Bharat.
  • Reduce transportation costs: Sugarcane and ethanol is produced mainly in three states viz Uttar Pradesh, Maharashtra and Karnataka. 
    • By bringing new grain based distilleries in the entire country would result in distributed production of ethanol and would save a lot of transportation.

The National Policy on Biofuels-2018 

  • It envisages an indicative target of 20% blending of ethanol in petrol and 5% blending of bio-diesel in diesel by 2030.
    • Now it has been proposed to prepone the 20% blending of ethanol with petrol by 2025
  • It allows production of ethanol from damaged food grains like wheat, broken rice etc. which are unfit for human consumption. 
  • The policy also allows conversion of surplus quantities of food grains to ethanol, based on the approval of the National Biofuel Coordination Committee.
  • Use of damaged foodgrains and surplus foodgrains for production of ethanol will increase its availability for Ethanol Blended Petrol (EBP) Programme.  
  • Benefits: Annual foreign exchange impact of about Rs. 5070 crore and carbon emission reduced to the extent of 29.94 lakh tonnes.        
  • Under the EBP programme, ethanol blending in petrol is being undertaken by the Oil Marketing Companies (OMCs).