Unblended petrol, diesel to cost ₹2/litre more from Oct 1

NEW DELHI: Petrol or diesel that is not blended with ethanol or similar notified compounds will be dearer from October 1, as Union finance minister Nirmala Sitharaman, while presenting the 2022-23 Budget, levied an additional excise duty of ₹2 per litre on such fuels.

The move will mean that diesel in most parts of the country may cost more from October, while petrol prices will likely rise in regions where the availability of the ethanol and logistics hamper the supply of blended fuel.

“To encourage the efforts for blending of fuel, unblended fuel shall attract an additional differential excise duty of ₹2/ litre from the 1st day of October 2022,” Sitharaman said during her speech in the Lok Sabha on Tuesday.

The Budget proposal would mean that areas that do not have a supply of blended fuel will see higher rates than the areas where the blended fuel is sold. At present, parts of the north-east, Jammu & Kashmir, some areas in the southern parts of the country and parts of Rajasthan do not have a supply of ethanol-blended petrol.

The government is also looking at a few other changes in duty rates, customs tariffs and customs law to disincentivise the use of conventional petrol and diesel, and promote blended fuel, which has lower carbon emissions and is cheaper than petrol.

In June last year, India had brought forward its target of producing 20% ethanol blended petrol (E20) by two years. Initially set for 2030, the target date was brought forward to 2025, which was advanced to April 1, 2023 through another notification. For biodiesel or ethanol blended diesel, the target date was kept unchanged at 10% by 2030.

While the additional duty will push oil companies to procure more ethanol and arrange logistics to transport it to deficient areas, it is unlikely the country will be able to build infrastructure to manufacture biodiesel to the scale needed for blending in the next eight months, officials said.

At a post-Budget press conference, revenue secretary Tarun

Bajaj said the matter has been discussed with the petroleum ministry.

“...This is something to push the petroleum companies to ensure that they do the blending. Our desire is not to collect the tax, because it will be very minimal. The desire is the blending happens and to an extent, it benefits the country,” he said.