Indian petrol policy shifted to reduction on oil importation dependency

DATE: 19 SEP 2020

Government has formulated a National Bio-Fuel Policy 2018 to boost the availability of biofuels in the country.

During 2019-20, consumption of petroleum products was 213.7 MMT and percentage of import dependency of oil and oil equivalent gas was 77.9%.

Currently, the Central Government levies Excise duty on petrol and diesel, whereas State Governments levy VAT/Sales Tax. Excise duty is levied on specific basis (fixed amount per litre) and VAT/Sales tax (by most of the states) is levied on an ad-valorem basis. Details of Excise duty on non GST goods and the rates of products under GST are annexed.

Ministry of Petroleum and Natural Gas has identified a basket of strategies inter-alia including primarily increasing domestic production of oil and gas and promoting biofuels/alternate fuels with a view to achieving a reduction in import of crude oil. Government has also taken a number of initiatives to encourage the use of alternative fuels like ethanol and bio-diesel through Ethanol Blending in Petrol (EBP) Programme and Bio-diesel blending in diesel. Government has formulated a National Bio-Fuel Policy 2018 to boost the availability of biofuels in the country. To give a major thrust to Ethanol Blending Programme, Oil CPSEs are establishing twelve 2G Ethanol plants across 11 States of the country.

As per resolution dated 08.11.2019 regarding authorization to market transportation fuel, the authorized entities, in addition to conventional fuels, are required to install facilities for marketing at least one new generation alternate fuels like Compressed Natural Gas (CNG), bio-fuels, Liquefied Natural Gas (LNG), electric vehicle charging points etc. at their proposed retail outlets (RO) within three years of operationalization of the said outlet subject to the entity complying with various other statutory guidelines. Also, as on 31.08.2020, PSU Oil Marketing Companies have set up Electric Charging facilities at 110 retail outlets and Battery Swapping Stations at 17 retail outlets in the country.

Ethanol-blended petrol

The ethanol procured for ethanol-blended petrol by Oil Marketing Companies (OMCs) in the last three years is as under:

*ESY – Ethanol Supply Year (1^st Dec to 30^th Nov)

Based on the offers received so far from ethanol manufacturers, the amount of ethanol contracted by OMCs for supply during the current ESY is 192.87 crore litre.

National Biofuel Policy -2018 envisages an indicative target of 20% blending of ethanol in petrol to be achieved by 2030. The ethanol blending depends on the availability of ethanol which further depends on availability of raw material for ethanol production viz, sugarcane, damaged food-grains unfit for human consumption, etc. and supply demand scenario in other ethanol consuming sectors like potable alcohol, pharma, chemical, petrochemicals, etc

 Department of Food and Public Distribution (DFPD) has informed that ethanol produced either from molasses or sugarcane is same and equally beneficial.

The names of major mills which are producing ethanol directly from sugarcane juice/sugar/sugar syrup are annexed.

 The important measures taken to increase the production of ethanol for blending include:

1. Encouraging the production of ethanol from sugarcane juice and sugar/sugar syrup.
2. Fixing the remunerative ex-mill price of ethanol from various feedstocks.

(iii) Extending interest subvention to distilleries.

(iv) Amendment to Industries (Development & Regulation) Act, 1951, for free movement of denatured ethanol for Ethanol Blended Petrol (EBP) Programme.

(v) Reduction in Goods & Service Tax on ethanol meant for EBP Programme from 18% to 5%.

(vi) Extension of EBP Programme to the whole of India except island UTs of Andaman Nicobar and Lakshadweep with effect from 01.04.2019.

(vii) Enhancing ethanol storage at Oil Marketing Companies locations,

(viii) Formulating an “Ethanol Procurement Policy on a long-term basis under Ethanol Blended Petrol (EBP) Programme”.

Prices of petrol and diesel have been made market-determined with effect from 26.06.2010 and 19.10.2014 respectively. Since then, the Public Sector Oil Marketing Companies (OMCs) take appropriate decision on the pricing of petrol and diesel, in line with international product prices and other market conditions. The OMCs have not only increased but also decreased the prices of petrol and diesel, in line with changes in international prices and rupee-dollar exchange rate.

Petrol Price Controlling 

The prices of petrol and diesel in the country are benchmarked to their international product prices. Generally, the prices of petroleum products in the country are higher/lower than other countries due to various factors, including prevailing tax regime and subsidy compensations by the respective Governments, the details of which are not maintained by the Government.

The details of the monthly price of Indian Basket of crude oil and retail selling prices of petrol/diesel during the last three years are available at the website of Petroleum Planning and Analysis Cell (PPAC) i.e. www.ppac.gov.in.

 The details of profit after tax earned by Oil Marketing Company from all activities during the last three years and current year is given as under:

      (Rs. Crore)                                                                                    

 With an aim to reduce the prices of petrol and diesel and give relief to the consumers, the Central Government reduced the Central Excise duty on petrol and diesel by Rs. 2 per litre with effect from 4th October, 2017. The Central Government further reduced the Central Excise duty on petrol and diesel by Rs. 1.5 per litre with effect from 5th October, 2018 and Public Sector OMCs also reduced Rs. 1.00 per litre to reduce the overall price of petrol and diesel. The Central Government also requested the State Governments to make a reduction of Rs. 2.50 per litre in VAT imposed by them on petrol and diesel. 18 State Governments and 1 Union Territory had reduced VAT on petrol and diesel.

The details of revenue from central excise duty collected on petrol, high-speed diesel oil and aviation turbine fuel (ATF) is as under:

        (Value in Rs. Crores)                                                                                         

   Source: DG-Systems-CBIC/PrCCA; *: extrapolated from Apr-July data

The total Contribution to Central and State exchequer by the petroleum sector during the last three years and current year is given below:

               Based on 16 major oil & gas companies

The Government continues to modulate the effective price to consumer for Subsidized Domestic LPG. As Government is modulating the retail price of subsidized domestic LPG, the subsidy on these products increase/ decrease with the corresponding increase/ decrease in the prices of these products in the international market.