He said the government has taken a number of steps in the last four years to bring a "paradigm shift" in the Rs 1-trillion sector.
"Blending of ethanol with petrol has reached 4 per cent from 1-1.5 per cent in the last four years. In the 2018-19 sugar year (October-September), the blending level will reach 7-8 per cent," Pradhan said.
The minister said though buying ethanol is costly for the OMCs because of hike in procurement price, the government has taken a holistic view to boosting ethanol production for the welfare of farmers as well as to meet the energy requirements.
Pradhan said the government spends Rs 8-10 trillion of foreign exchange to meet the energy demand by importing crude oil, liquefied natural gas, and other products.
He said the government has provided soft loans to the first group of applications for creating ethanol capacity and it is committed to sanctioning loans for the second group.
In June, the government approved Rs 44-billion soft loans for building the ethanol production capacity to absorb the excess cane. It will bear interest subvention of Rs 13.32 billion over a period of five years, including a moratorium period of one year.
According to industry sources, the government may provide an interest subsidy of about Rs 18 billion in the second round and it may also allow standalone molasses-based distilleries to participate in this soft loan programme.
So far, sources said, around 268 projects have been approved for expansion of the ethanol production capacity, and financial assistance for 114 projects has been approved. The remaining projects will require a fresh fund for interest subvention amounting to around Rs 18 billion.
Later in September, the government approved an over 25 per cent hike in the price of ethanol produced directly from sugarcane juice for blending in petrol, in a bid to cut the surplus sugar production and reduce oil imports.
The government launched the programme EBP in 2003 on pilot basis which was subsequently extended to 21 states and four Union Territories to promote the use of alternative and environment-friendly fuels. But the target of 10 per cent blending of ethanol in petrol was never met.
Since 2014, the government notified an administered price for ethanol. The move significantly improved the supply of ethanol during the past four years.
The volume of ethanol procured by public sector OMCs has increased from 380 million litres in ethanol supply year 2013-14 to an estimated 1.5 billion litres in 2017-18.
Earlier, ISMA President Gaurav Goel said the ethanol blending level will reach 8 per cent in 2018-19 as orders for 2.6 billion litres have been received from OMCs. For 10 per cent blending, there is a requirement of 3.3 billion litres of ethanol.
Goel exuded confidence that the blending level would reach 10 per cent by 2020 and 20 per cent by 2022.
The ISMA president demanded that the government link sugarcane price to sugar rates as a long-term solution for this sector. Goel said there would be no cane arrears and industry would not seek any fund from the government if this demand is met.
He said the sugar production is likely to fall to 31.5 million tonnes in the current marketing year as against 32.5 million tonnes in the previous year. The annual domestic demand is 26 million tonnes.
The opening stock was 10.7 million tonnes as on October 1.
Goel said mills have contracted to export 1 million tonnes of sugar out of the quota of 5 million tonnes earmarked by the government for 2018-19. He recommended a strict action against mills which do not export sugar.