Ministries to demand cut in biodiesel GST, biofuels policy

New Delhi, Aug 10 : The Union Petroleum and Road Transport Ministries will ask for a reduction in GST rates on biodiesel from the current 18 per cent to 5 per cent and a note on a new policy on biofuels 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 per cent GST (Goods and Services Tax) on bio-diesel and bring it down to 5 per cent," Union Road Transport and Highways Minister Nitin Gadkari said at an event here to mark World Biofuels Day.

Describing biodiesel 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 biofuels policy in coordination with the Road Transport Ministry.

"A new biofuels 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 biofuel 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 biofuels 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 million in biofuel research and development with the recent transfer of the biofuel 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 ethanol blended petrol with percentage of ethanol up to 10 per cent.

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

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