Stop taxing ethanol: Pawar to states

Union agriculture minister sharad pawar on wednesday cautioned state governments against imposing multiple taxes...

Union agriculture minister sharad pawar on wednesday cautioned state governments against imposing multiple taxes on ethanol meant for blending with petrol, saying such measures were “not in conformity” with the Constitution. The statement comes at a time when the Centre is planning to make it mandatory to blend 10 per cent ethanol in petrol to help the ailing sugar industry.

With the record sugar production of 28 million tonne creating a glut this year, Pawar, who was speaking to state ministers dealing with sugar, emphasised that using ethanol in fuel can improve the viability of sugar mills. The minister said that despite India’s potential to produce and use ethanol as a fuel, the country was still struggling to even begin its ethanol blending programme. He said the prevailing “policies and implementation have failed to provide the right degree of encouragement”.

“Due to the multiplicity of taxes imposed by some of the important sugar producing as well as non-sugar producing states, the producers have been shying away from investing in ethanol production,” Pawar told the ministers from major sugar producing states.

Story continues below this ad

Reasoning that “high taxes and fees” on ethanol make it “unviable” and even “inhibits” free movement of ethanol across the country, Pawar reminded that states have powers to impose taxes and duties only on “liquor for human consumption”. He urged the ministers to remove all impediments imposed on free and unrestricted movement of denatured ethanol.

Pawar said the conversion of surplus sugarcane into ethanol was the way to avoid the cyclical crisis in the sugar industry. He also emphasised the need to ensure continuous and adequate demand for ethanol in the country for the success of the blending programme.

However, sources present at the meeting said that while all states agreed to rationalise taxes, there was no consensus on abolition of the same.

But, the states are learnt to have agreed on 10 per cent mandatory blending of ethanol with auto fuels from October 2008, as recommended by an EGoM looking into the sugar industry. Considering that only five per cent ethanol is allowed in petrol now, the consent of state Government representatives to raise this to 10 per cent is being considered a positive development.