Total excise waiver on green petrol

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New Delhi: As an incentive for petroleum companies to go green by blending 10% ethanol with petrol, the government has exempted such fuel from excise duty. The Central Board of Excise and Customs through a recent notification has said such fuel, also known as E-10, will not attract any central excise duty.

At present, a basic excise duty of Rs 6.35 per litre is levied on petrol along with an additional excise duty of Rs 2 per litre and a special additional excise duty of Rs 6 on every litre.

A finance ministry official said, “This will not result in a price reduction on the fuel. It is aimed at encouraging oil companies to start the 10% blending by reducing the duty impact on them.” A similar tax incentive was also given to 5% ethanol blended petrol, which is already being sold in large parts of the country.

The ministry of petroleum was scheduled to introduce 10% mandatory blending of ethanol with from October 2008, after the Cabinet Committee of Economic Affairs had given the go ahead for it in 2007. But the move now seems to have been shelved and instead Indian Oil Corporation and other oil marketing companies (OMCs) are conducting a pilot project using the doped fuel in Maharashtra and Uttar Pradesh.

While the reservations of automakers about the compatibility of car engines to 10% ethanol blended fuel was one of the reasons behind deferring the decision, the high cost of ethanol, which is a major concern for OMCs, was another factor.

The issue was highlighted by minister of state for petrol Dinsha Patel who informed the Lok Sabha in December that OMCs do not find blending of petrol with ethanol commercially viable. “We are unable to purchase ethanol as there is a demand for increasing the rate to Rs 28 per litre from Rs 21.50 per litre,” he said, while responding to a question.

As far back as October 2007, a group of ministers headed by external affairs minister Pranab Mukherjee had recommended to the CCEA to make 10% ethanol blending compulsory and had fixed a uniform purchase price of Rs 21.50 per litre for the fuel.

Public sector OMCs have been unable to buy bio-diesel as most suppliers are unwilling to sell at the declared price of Rs 26.50 per litre, Patel added.