India cuts ethanol blending tax to 5% amid calls for lower crude imports

India has reduced the goods and services tax on ethanol meant for blending with gasoline to 5% from 18% as part of efforts to cut excessive dependence on imported crude oil, Union Minister Rameshwar Teli said Dec. 16.

India, the world's third-biggest crude importer and consumer, relies 85% on overseas purchases to meet domestic oil demand.

The procurement price of ethanol produced from sugarcane-based feedstocks like C&B heavy molasses, sugarcane juice, sugar and sugar syrup is fixed by the government on an annual basis.

The procurement price of ethanol produced from food grain-based feedstocks is fixed by state-run oil marketing companies on an annual basis.

The steps taken by the Indian government to cut dependence on imported gasoline include a number of policy initiatives for an increase in domestic crude oil production by generating quality geoscientific data and its easy access, awarding new exploration acreage, expediting production from new development acreages and focusing on production maximization from existing production acreages.

India has been promoting the usage of biofuel under the National Policy on Biofuels of 2018. The policy allows use of multiple feedstocks for producing bioethanol for an increased supply of ethanol for blending with gasoline.

The encouraging initiatives on the supply side of ethanol have prompted the Indian government to advance the target of 20% ethanol blending in gasoline from 2030 to 2025-26, an official statement said.

India has also notified a scheme for promoting second generation (2G) ethanol production from cellulosic and lignocellulosic including the petrochemical route in the country by providing financial support.

Indian ethanol scenario

The existing vehicles on the Indian roads can take up to 13% ethanol-blended gasoline without any modification in the engine and any loss in its efficiency, according to a study by Indian Oil Corp., India's largest state-run refiner.

India has already framed norms for 12% ethanol blending (E12) and 15% ethanol blending (E15) with gasoline.

These standards will slowly be rolled over the next couple of years to move from the 10% blending expected to be achieved in 2022 to 20% blending by 2025.

At present, India has an installed capacity of 6 billion liters for ethanol output.

By 2025, India will need to produce at least 10 billion liters of ethanol for a 20% blending program with a projected installed capacity of 12 billion liters, Indian Sugar Mills Association said in a study.

India is conducting research in ethanol blending with diesel as part of overall efforts to develop alternative fuels to cut dependence on crude imports and carbon-dioxide emissions.