The government has expanded the excise duty waiver for biofuels to encourage the blending of higher proportions of ethanol and components of vegetable oil with petrol and diesel.
The move follows the amendments to the National Policy on Biofuels to advance the date by which oil marketing companies have to raise the percentage of ethanol in petrol to 20% to 2025 from 2030 earlier.
According to a government notification, the tax exemption will be applicable to ethanol portion of 12%-15% blended with gasoline, up from 10% earlier. Similarly, for diesel, the exemption will apply to a 20% portion of alkyl esters of long chain fatty acids obtained from vegetable oils.
Apart from boosting energy security, the ethanol blended petrol programme aims at cutting India’s import dependency for fuel and increasing the income of sugarcane growers.
The Niti Aayog had said that 20% ethanol blending by 2025 would entail annual foreign exchange savings of Rs 30,000 crore and help meet India’s commitment to reduce carbon intensity of its GDP.
A 10% blending of petrol with ethanol does not require overhaul of automobile engines but a 20% blend could require it.
India met the target of 10% ethanol blending in petrol in May, five months ahead of schedule. The blending percentage was below 2% in 2014.
According to the Niti Aayog’s projections, ethanol demand will reach 10.16 billion litres by 2025, while the country’s ethanol production capacity include 4.25 billion litres derived from molasses-based distilleries and 2.58 billion litres produced by grain-based distilleries.
Prime Minister Narendra Modi said that higher ethanol blending has helped farmers earn Rs 40,600 crore in the last eight years.