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The government's Rs 15,000-crore soft loan programme for sugar mills to set up ethanol units is moving at a very slow pace as banks have so far disbursed only about Rs 800 crore, industry experts have said.

The Centre had announced this loan package in two tranches -- first in June 2018 amounting to Rs 4,440 crore and the other in March 2019 of Rs 10,540 crore.

The objective was to help millers in clearing cane arrears and divert surplus sugar for ethanol manufacturing.

A soft loan is a loan that is given at a subsidised interest rate.

"About Rs 800 crore soft loan has been disbursed from banks so far to sugar mills for setting up ethanol units," a senior food ministry official told PTI.

The soft loan package is being implemented by the food ministry, which provides a list of eligible loan applicants to the banks for further process.

The ministry had received total 418 applicants, of which 328 applicants have been identified as eligible for availing soft loan from banks, the official said.

"The ministry has cleared 328 applications totalling a loan amount of Rs 16,482 crore so far. Now, banks have to further process these applications and take a call," the official added.

According to industry experts, only 5-6 per cent of the total soft loan amount of Rs 15,000 crore announced under the scheme has been disbursed so far by banks.

Of 418 applications, the ministry has approved 328 proposals after scrutinising various eligibility criteria.

The ministry checked whether mills have cleared loans taken from the government's Sugar Development Fund (SDF) and also whether they supplied their quota of sugar for ration shop sale (called levy sugar) prior to 2013.

A sugar industry official, who did not wish to be identified, said much of the time is being wasted in the first level of screening at the ministry level.

Ideally, the banks should check the eligibility criteria and sanction the loan amount accordingly, the industry official added.

"In this process, the scheme has not been able to take off properly. The scheme was launched in June 2018 and still the ministry is screening the applications. In this pace, mills may not benefit from the scheme. It takes at least 18 months to establish an ethanol unit," an another industry official said.

At present, 3-4 lakh tonnes of sugar gets diverted for ethanol making. With creation of additional capacity under the scheme, 9-10 lakh tonnes of sugar is expected to be diverted for ethanol production, according to the All India Sugar Trade Association.

Sugar mills have supplied 175 crore litres of ethanol to oil marketing companies (OMCs) till October 22 of the 2018-19 season (October-September) and helped them achieve 5.2 per cent blending with petrol, as per industry data.

The soft loan was announced to improve liquidity of mills, reduce sugar inventory and facilitate timely clearance of cane price dues of farmers.

However, cane arrear still remains high at Rs 9,000 crore so far this year based on the sugarcane price fixed by both the Centre and states, as per the ministry data.

There is sugar glut in India, the world's second largest sugar producer after Brazil. The country had produced 32.5 million tonnes and 33.1 million tonnes in 2017-18 and 2018-19 seasons (October-September), respectively, much higher than the domestic consumption of 25 million tonnes.