GST Rate on Ethanol Reduced from 18% to 5% by Centre

The recent decision by the central government to slash the GST rate on ethanol from 18% to a mere 5% marks a pivotal step in driving the Ethanol Blended Petrol (EBP) Program. This strategic move was underlined by Rameswar Teli, the Minister of State for Petroleum and Natural Gas, in response to a parliamentary query. With the intent of fortifying the integration of ethanol into fuel, the government has decisively reduced the tax burden on ethanol meant for blending, invigorating its presence in the market.

To substantiate this endeavor, the government has also unveiled the Pradhan Mantri JI-VAN Yojna, a scheme designed to invigorate the production of Second Generation (2G) ethanol. Notably, the government has established fixed procurement prices for ethanol derived from sugarcane-based sources such as C&B heavy molasses, sugarcane juice, sugar, and sugar syrup. Additionally, Public Sector Oil Marketing Companies will determine the pricing for ethanol sourced from food grain-based materials, on an annual basis.

In a comprehensive approach aimed at diminishing reliance on imported gasoline, the government has embarked on various strategic measures. These encompass policy initiatives directed at augmenting domestic crude oil production through improved geoscientific data accessibility, allocation of new exploration areas, expediting production from emerging development zones, and intensifying output from existing production sites.

An important milestone in promoting biofuels within the country was achieved with the inception of the National Policy on Biofuels (NPB) in 2018. This visionary policy has sanctioned the use of diverse feedstocks for generating bio-ethanol, thereby fostering an augmented supply of ethanol for amalgamation with petrol. Bolstered by progress on the ethanol supply front, the government has advanced the target for ethanol blending in petrol from 20% by 2030 to an earlier timeline of 2025-26.

The government’s commitment to fostering Second Generation (2G) ethanol production is also evident through the Pradhan Mantri JI-VAN Yojna. This initiative seeks to boost the production of 2G ethanol, encompassing cellulosic, lignocellulosic, and even petrochemical routes, through financial support mechanisms. In essence, this multifaceted approach demonstrates the government’s resolve to invigorate ethanol integration and domestic biofuel production, underscoring its dedication to sustainable and forward-looking energy strategies.

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