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Govt seeks subsidies to promote bio-fuel use

Five per cent of vehicles in India will run on bio-fuels by 2012, according to the new draft bio-fuel policy, reports Chetan Chauhan.

india Updated: Jan 05, 2007 00:29 IST

Five per cent of vehicles in India will run on bio-fuels by 2012, according to the new draft bio-fuel policy.

Government subsidies and financial incentives for industry and farmers have been sought to achieve this target. The Cabinet will take up the policy for consideration later this month.

Vehicles will run on petrol blended with ethanol made from sugarcane and on bio-diesel from oil extracted from Jatropa seeds. At present, bio-fuels are available only in select cities like Faridabad.

"By 2017 we intend to supply bio-fuels for 10 to 20 per cent vehicles running on Indian roads," a government official said. At present, a litre of ethanol costs Rs 20 and bio-diesel Rs 21, both of which will come down with the increase in production.

Before that, the government expects an increase in demand for bio-fuels given the increase in petroleum product prices. This will have to be met through imports. However, in order to protect the domestic bio-fuel industry, the ministry for non-conventional and renewable energy has sought the Cabinet's approval for imposing duties and taxes on imported bio-fuels. This will be done in consultation with the finance ministry and agriculture ministry.

Since farmers have stepped up cultivation of sugarcane and Jatropa for bio-diesel, the ministry has also suggested setting up a National Bio-fuel Board for coordinating and monitoring new programmes. The board, headed by the prime minister, will approve policy and an executive council will deal with business issues.

In addition, the state governments will be be advised to promote a framework for public private partnership to encourage entrepreneurship, the policy says. Andhra Pradesh has taken the lead by approving a new bio-fuel policy and offering incentives for Jatropa farming.

The policy document says targets for operation of petrol and diesel vehicles on bio-fuels would be prepared which will also include rules for conversion of petrol vehicles to bio-fuel mode.

To promote the cleaner fuel, the ministry has sought excise duty concessions on all bio-fuels and equipment related to its production. The ministry also wants financial incentives to increase oil production, for engine development, its application and conversion of petrol engines to bio-fuel mode. Insurance cover will be offered to the bio-fuel industry, the document adds.

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