17.12.2021- India Cuts GST On Ethanol To 5% To Promote Fuel Blending

India Cuts GST On Ethanol To 5% To Promote Fuel Blending

India has lowered the goods and service tax on ethanol meant for blending with gasoline as it looks to curb dependence on imported fuels. The GST on the alcohol has been cut from 18% to 5% under the Ethanol Blended Petrol Programme, Minister of State for Petroleum and Natural Gas Rameswar Teli said in response to a question posed in the Lok Sabha on Thursday during the ongoing winter session of parliament.

The NITI Aayog and Ministry of Petroleum and Natural Gas had prepared a report, “Roadmap For Ethanol Blending In India 2020-25”, in June which suggested tax breaks on ethanol.

For better acceptability of higher ethanol blends, retail price of such fuels, the report said, should be lower than unblended petrol to compensate for the reduction in calorific value and incentivise switching to blended fuels.

The minister also highlighted policy initiatives aimed at increasing domestic crude oil production such as generating quality geo-scientific data, facilitating its easy access, awarding new exploration acreage, expediting production from new development acreages and focusing on production maximisation from existing production acreages.

“The government has notified Pradhan Mantri JI-VAN Yojna for promoting second-generation ethanol production in the country by providing financial support,” the minister said in a statement. “And the National Policy on Biofuels–2018, too, allows use of multiple feedstocks for producing bio-ethanol for increased supply of ethanol for blending with petrol.”

The policy provided an indicative target of 20% blending of ethanol in petrol and 5% blending of biodiesel in diesel by 2030. The target of 20% blending of ethanol in petrol was later advanced by the government to 2025-26.

The procurement price of ethanol produced from sugarcane-based feed stocks like C and B heavy molasses, sugarcane juice, sugar and sugar syrup are fixed by the government, while those made from foodgrain-based feedstocks are set by state-run oil marketers annually.

India’s alcohol and ethanol distillation capacity is around 787 crore litres per annum as on Nov. 30, according to data from the Department of Food and Public Distribution. Out of that, 519 crore litres are produced from molasses-based distilleries and 268 crore litres from grain-based units.

Source- Bloomberg


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