Tax on ethanol likely to be centralized

The Group of Ministers comprising Cabinet members is likely to approve a proposal to include ethanol in the country's central sales tax list at a meeting later today, a senior industry association member said. If approved, ethanol will attract a one-time 4% tax on the ex-distillery sale price, said the senior executive from the Indian Sugar Mills Association, who declined to be named.
The Cabinet is likely to implement the centralized tax on ethanol by the end of the month. Currently, Indian states tax ethanol at 4%-19% each time the biofuel component is transported through the states en route from the distillery to buyers, which include petroleum companies. As a result, although distilleries offer ethanol around Rs. 21.5/liter, buyers usually pay up to 33% more.
In India, sugar is used to produce ethanol. Indian petroleum companies have used only 100-million liters of ethanol in gasoline production in the first seven months this year, falling far behind a government target to use 550-million liters of ethanol by end 2007. In November 2006, the Indian government introduced ethanol blending in gasoline to boost its agricultural sector and reduce pollution.