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Govt to levy additional excise duty on unblended fuel to promote ethanol blending

Budget 2022: Govt to levy additional excise duty on unblended fuel to promote ethanol blending

India has been aggressively pursuing cleaner mobility and is exploring several options, including promoting EVs and CNG vehicles. Along with this, the government is also increasingly promoting the use of ethanol-blended-petrol in India in order to reduce pollution and bring down the cost of petroleum import. Ethanol-blended-petrol is petrol that is mixed with a small ratio of ethanol and has been available in India for over two decaded. Now, blending ethanol with petrol reduces the emission of carbon monoxide by providing more oxygen for combustion. As a result of this, the Indian government wants to increase the ratio of ethanol in petrol and has taken several steps to ensure the same. First was reducing the GST on ethanol last year and the second will be the levying of surcharge on unblended fuel. Finance Minister Nirmala Sitharaman, while presenting budget 2022, mentioned that unblended fuel shall attract an additional differential excise duty of ₹2/ litre from the 1 October, 2022. This step has been announced in a bid to reduce the share of unblended petrol in the country to reduce the emission of harmful particles. Along with this, increasing the share of ethanol in petrol will also reduce India’s petroleum import and give impetus to farmers for producing ethanol.

The FM, in her speech, mentioned that blending of fuel with ethanol is a priority for the government and this is also evident by the fact that the government has advanced the target of achieving 20 per cent ethanol blending in petrol (called E20 fuel) from 2030 to 2025 under EBP (ethanol blending policy). Levying a surcharge on unblended fuel blending will help the government achieve this target, something which previously seemed difficult. Even though E10 has been on sale in India for a while, the shortage of ethanol has been a roadblock in ensuring 10 per cent ethanol blending all over the country. The average ethanol blending with petrol in India reached 8.1 per cent from last year as opposed to 5 per cent in 2020.

The Indian government is actively pushing for increased ethanol blending in India to reduce carbon emissions and the import of petroleum. In December 2021, the Union Road Transport and Highways Minister advised automakers in India to start making flex-fuel engine vehicles in six months. In case you didn’t know, flex-fuel is already being used in several countries, including the USA and Brazil. Using ethanol for powering vehicles can significantly reduce carbon emissions and help India comply with the commitments made at the COP26. And in an effort to promote flex-fuel, the Indian government has also included auto components of flex-fuel engines in the PLI (production linked incentive) scheme. The recent advisory to the automakers only cements the government’s intentions to sincerely pursue ethanol as a fuel.

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