PM reviews proposed ethanol policy to ensure timely roll-out

The policy will propose a roadmap, which would "increase blending by states from 5 percent to 12-15 percent by 2026, and then it'll be increased to 20 percent by 2030."

Currently, India mandates 5 percent of ethanol blending.

Once the policy is in place, this will proportionately reduce India's dependence on the volatile international crude market to ensure limited price fluctuations. The proposed ethanol policy will help correct, "Unstable pricing, high taxes and duties and heavy state control on movement," sources added.

"Under the proposed policy, the government is likely to allow use of grain for ethanol and is likely to allow use of maize to supplement ethanol supplies from cane/molasses. This permission will be given in the next two-three months," sources elaborated.

To address the price issue, "The government would fix ethanol prices by next quarter for maize and is likely to fix realistic transport rates at par with petrol." Moreover, to fix transportation challenges, the policy will enable, "creation of pipeline infrastructure for ethanol movement."

Further, sources said that to ensure a desired push, the government plans to, "Address sugar exports for three years, reduction in GST rates, releasing pending Rs 8,000 crore subsidy dues, convince automobile manufacturers to plan 15 percent blend and ensuring time bound environmental clearances by states with a proposed timeline for clearance of 8-10 months."

On GST rates, the government is likely to reduce 28 percent GST on molasses, and reduce 18 percent on special denatured spirit to 5 percent.

GST on ethanol was already reduced from 18 percent to 5 percent in July 2018.

Further, to encourage more sugar mills to divert sugarcane for producing ethanol rather than sugar, the Centre, "…is planning this policy to reduce sugar exports in three years by diverting sugar producers into ethanol. The government will soon release Rs 8,000 crore of pending subsidy to help mills invest in ethanol capacities."

Overall, lower exports will reduce government subsidy and higher ethanol production will reduce net crude oil imports bill, sources noted.