Ministries want cut in bio-diesel GST, new bio-fuels policy

New Delhi: The Union Petroleum and Road Transport Ministries will ask for a reduction in GST on bio-diesel from the current 18 percent to 5 percent while a note on a new policy on bio-fuels is to be placed for cabinet approval soon, it was announced on Thursday.

"Along with Petroleum Minister Dharmendra Pradhan, we will jointly request Finance Minister Arun Jaitley to reduce the 18 percent GST (Goods and Services Tax) on bio-diesel and bring it down to 5 percent," Union Road Transport and Highways Minister Nitin Gadkari said at an event here to mark World Bio-fuels Day.

The high GST on bio-diesel, which attracted zero excise duty, will make it costlier than diesel and, thereby, make it uncompetitive. 

Describing bio-diesel as a cost-effective, pollution-free import substitute to highly polluting diesel, Pradhan said the Petroleum Ministry is preparing a cabinet note on a new bio-fuels policy in coordination with the Road Transport Ministry.

"A new bio-fuels policy is going to come soon that will detail things like investments, incentives, the maximum assured price etc for the sector," he said.

"In a year or two, India`s bio-fuel economy will be worth an additional Rs 1 lakh crore providing employment to a lot of unemployed youth and income to our farmers in distress," Pradhan added, noting the potential of bio-fuels that are mostly produced by recycling agricultural and urban waste.

He said the state-run oil marketing companies (OMCs) are ready to invest up to $2 billion in bio-fuel research and development with the recent transfer of the bio-fuel vertical from the New and Renewable Energy Ministry to his ministry.

OMCs are already implementing the Ethanol Blended Petrol (EBP) programme under which they sell the EBP with the percentage of ethanol up to 10 percent. 

The government has also allowed procurement of ethanol produced from other non-food feed stocks like cellulosic and ligno cellulosic materials including via the petrochemical route.

In this connection, Pradhan noted that India currently needs to import over 80 percent of its oil and gas requirements at a cost of Rs 6 lakh crore.

It was announced at the event that OMCs have been asked to set up 12 ethanol plants in various states over the coming years. 

Indian Oil Corp plans to increase the capacity of its bio-fuel refineries to 100 tonnes a day from about 12 tonnes a day in the next two years, IOC Chairman Sanjiv Singh told reporters on the sidelines of the event. 

IOC currently operates three bio-fuel plants created with an cumulative investment of around Rs 30,000 crore.