The funding to increase the delivery speed of government subsidies is on top of a proposed $50 million package of capital subsidies, and government pressure on the oil industry to increase its ethanol use.

The Government wants to encourage more use of ethanol, a fuel alcohol made from sugar, barley, wheat and other vegetable crops, as a petrol additive to cut oil consumption and reduce pollution.

The federal decision approving the package came on the same day that the NSW Government approved a deferral of payroll tax for Manildra, the company that makes 87% of the fuel additive produced in Australia.

The bulk of the $47million will go towards assisting new entrants into the ethanol industry.

Australian Biofuels, majority-owned by the construction company Multiplex, has plans for new plants at Mossman in Queensland, Coleambally in NSW, Kwinana in Western Australia and other distilling plants.

The decision has come under fire from some economic and automotive groups who say the environmental benefits of ethanol are dubious as well as having only 60% of the energy content of petrol.

It is also believed that there was fierce opposition from the Treasury and Department of finance who maintained that the subsidy would do little for the sugar industry while imposing significant costs on other sectors.