Sunday, 21 June 2015

OPENING UP BIO-DIESEL MARKETING TO PRIVATE SECTOR IN INDIA


Story So Far

It has been quite some time that National Policy on Biofuels ("NPB") has been in place. NPB aims to ensure a minimum level of bio-fuels become readily available in the market to meet the demand at any given time. The current statutory requirements of blending are (i) 5% ethanol in petrol and (ii) 5% B(100) bio-diesel in diesel though NPB sets a blending target of 20% both for bio-diesel and bio-ethanol by 2017. However, NPB till date did not allow private bio-fuel manufacturers to market bio-fuel directly. The responsibility of storage, distribution and marketing of bio-fuels was vested with oil marketing companies (i.e. Indian Oil Corporation, Bharat Petroleum Corporation etc.) ("OMC"). Private bio-diesel manufactures so far needed to supply bio-diesel to collection centers approved by the OMCs and ensure that quality standards are met. The price and minimum quality requirements have also been regulated.

The Upcoming

Government of India has now taken some key cabinet decisions on bio-fuels and has decided to grant marketing rights to private bio-diesel manufacturers as well. The summary of the decisions take are the following:

1. The Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005 is likely to be amended to give marketing/distribution function to private bio-diesel manufacturers/their authorized dealers as well. However they need to ensure quality standards prescribed by Ministry of Petroleum And Natural Gas ("MoPNG").

2. Relaxation is proposed in Marketing Resolution No.P-23015/1/20001-Mkt.dated 08.03.2002 to give marketing rights for B100 bio-diesel to private bio-diesel manufacturers/authorised dealers for direct sales to consumers. 

3. The price of bio-diesel will now be market determined. 

4. Necessary measures to be taken to explore use of B100 bio-diesel as standalone fuel.   

Fiscal Incentives

1. Bio-ethanol already enjoys concessional excise duty of 16% and bio-diesel is exempted from excise duty. No other central taxes and duties are proposed to be levied on bio-diesel and bio-ethanol. 

2. Custom and excise duty concessions would be provided on plant and machinery for production of bio-diesel or bio-ethanol, as well as for engines that run on bio-fuels for transport, stationary and other applications, if these are not manufactured indigenously. 

Quality Standards

The Bureau of Indian Standards ("BIS") has already evolved a standard (IS-15607) for Bio-diesel (B 100).

FDI Policy

Biofuel technologies and projects enjoy 100% foreign equity through automatic route provided bio-fuel is for domestic use only, and not for export. However, plantation is not open for FDI.

Sources

1. http://mnre.gov.in/file-manager/UserFiles/biofuel_policy.pdf (June 21, 2015)

2. http://mnre.gov.in/file-manager/UserFiles/Cabinet-decisions-on-Biofuels.pdf (June 21, 2015)

3. http://petroleum.nic.in/Bio-Diesel.pdf (June 21, 2015)

4. http://petroleum.nic.in/docs/ethanol.pdf (June 21, 2015)

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