Government Cuts GST on Ethanol to Boost Biofuel Use and Reduce Gasoline Reliance

Introduction

The Government has implemented a significant reduction in the Goods and Services Tax (GST) on ethanol used for blending under the Ethanol Blended Petrol (EBP) Programme, aiming to promote biofuel usage and reduce reliance on imported gasoline.

Tax Rate Reduction on Ethanol

In a recent announcement, Minister of State for Petroleum and Natural Gas, Shri Rameswar Teli, stated in the Lok Sabha that the GST rate on ethanol for blending purposes has been decreased from 18% to 5%. This decision is part of the Government's ongoing efforts to encourage ethanol blending as a sustainable energy alternative.

Procurement of Ethanol

The procurement prices for ethanol derived from sugarcane-based feedstocks, such as C & B heavy molasses, sugarcane juice, sugar, and sugar syrup, are established by the Government. For food grain-based feedstocks, Public Sector Oil Marketing Companies determine procurement prices annually.

Government Initiatives to Reduce Gasoline Dependence

The Government is undertaking several policy measures to diminish dependence on imported gasoline:

Promotion of Domestic Crude Oil Production: Initiatives include generating quality geo-scientific data, ensuring easy access to this data, awarding new exploration acreage, and expediting production from both new and existing development areas.
National Policy on Biofuels (NPB) - 2018: This policy encourages biofuel usage by allowing the utilization of various feedstocks for bio-ethanol production, thus increasing the supply of ethanol for petrol blending.

Advancing Ethanol Blending Targets

Due to the positive developments on the supply side of ethanol, the Government has revised its target for ethanol blending in petrol from 2030 to 2025-26, aiming for a 20% blend.

Supporting Second Generation Ethanol Production

Additionally, the Government has introduced the Pradhan Mantri JI-VAN Yojna, which aims to support Second Generation (2G) ethanol production from cellulosic and lignocellulosic materials, including the petrochemical route. This initiative provides financial backing to bolster ethanol production capacity in the country.

Conclusion

The reduction in the GST rate on ethanol, along with other governmental initiatives, reflects a strong commitment to increase domestic biofuel production. These measures are pivotal for promoting sustainable energy solutions and reducing dependence on oil imports.