An expert committee has said the government should consider giving tax breaks on ethanol, fix a floor price for the fuel for the next five years and incentivise production and purchase of the greener fuel to reduce India’s dependence on imported gasoline.
“In order to bring predictability and to encourage investment by entrepreneurs in expansion or setting up of new ethanol capacities, the government may devise and declare a floor price of ethanol for five years with an escalation clause for purchase by oil marketing companies (OMCs),” the committee said in a report released by Prime Minister Narendra Modi on Saturday.
The report, prepared by NITI Aayog and the Ministry of Petroleum and Natural Gas (MoPNG), suggested that the retail price of ethanol blended fuel be kept lower than gasoline. For better acceptability of higher ethanol blends in the country, retail price of such fuels should be lower than normal petrol to compensate for the reduction in calorific value and incentivise switching to the blended fuel, it said, adding that tax breaks on ethanol as a fuel may be considered by the government.
Laying out the road map, the committee suggested pan-India availability of E10 fuel by April 2022 and its continued availability thereafter until 2025 for older vehicles. It suggested that E20 fuel be launched in the country in phases from April 2023 onwards so as to make it available across India by April 2025.
“MoPNG should notify that the blending programme is applicable to all oil marketing companies, including the private companies. This will trigger action by all relevant stakeholders,” said the report.
It is estimated that successful adoption of the E20 programme can save Rs 30,000 crore per annum on oil imports. Besides, ethanol is a less polluting fuel and offers equivalent efficiency at lower cost than petrol. India’s net import of petroleum was 185 mt totalling to $551 billion in 2020-21.
According to the report, globally vehicles compliant with higher ethanol blends are provided with tax benefits. “A similar approach may be followed so that the cost increase due to E20 compatible design may be absorbed to a certain extent,” it said.
The committee further suggested that efforts be made to significantly augment ethanol production in India.