Request Government of India to classify Biofuels Industry in 5% rate category

  High GST Rate could shut biodiesel Industry, a major setback to promotion of green fuel Decision not in line with PM’s Swatch Bharat Mission, Needs Course Correction: BDAI High GST rate on Biodiesel will be the "final nail" in the coffin for the sunrise and green sector which is already reeling under the pressure of high, complex and varied taxation policies of the states and lack of clarity on the policy front, has made it even more vulnerable for the industry players. According to BDAI, India needs promotional policy and initially no tax for green fuel biodiesel. Promoting green fuel biodiesel would go long way in curbing vehicular emission and to protect the environment. At present, the use of Biodiesel is completely voluntarily and there is no mandate/obligation on the polluters to reduce the emission by using Biodiesel. A national policy that mandates the use of green fuels is urgent and the need of the hour given the rampant pollution across India. Any tax on Biodiesel will discourage the users and kill this sunrise Industry. The industry produced and supplied close to 0.5 million tons to date and is gearing up to deliver up to 1million tons of Biodiesel by 2019 and this will provide half a million direct jobs and one million jobs to ancillaries. High taxation would not only put capacity building under pressure, but also pose a threat to jobs and the industry as a whole. Under the GST rates announced recently, biodiesel, ethanol and other mixing products would be charged 18 per cent. For the last 10 years, Biodiesel attracted zero excise duty and even some states including the leading producing states of West Bengal, Uttar Pradesh, Uttarakhand, Chhattisgarh and Rajasthan, charged zero Value Added Tax (VAT) on biodiesel. The real start to Biodiesel supply in India commenced only 2 years ago and is very much in its nascent stage. Having had the zero excise duty for the last 10 years, replacing the same with a very high 18% GST is totally biased against this renewable and eco friendly fuel. It is a matter of great despair as 18% GST would make biodiesel costlier than diesel while the thrust globally is on eco friendly and renewable fuel. It is a paradox when we have high pollution in the cities that a product like biodiesel that can reduce pollution, specifically particulate pollution is slotted in a very high tax structure rather than being exempted to improve its use. The high tax rise of Rs. 10 per liter would restrain mass consumption by even existing users like OMCs, Railways and Road Transporters. The farmers will switch back in to use of polluting fuels and other products. Honourable Prime Minister Narendra Modi is pushing for Swatch Bharat with a cess and cutting consumption of crude oil to push green biofuels. Higher GST rate on BIofuels contradicts the government’s efforts to push this clean and green fuel. We were hopeful that the government’s intentions are clear and it would revive this green industry. However, it appears the GST Council failed to realize the importance of biofuels. There is an urgent need for course correction. In terms of revenue, the government is not going to be benefitted as the industry would collapse. The industry needs promotional tax and other policies to incubate and offer the best green fuel products. But higher GST rate has come as a major setback to the biodiesel sector.     Biofuels across the world are being promoted as a green fuel which helps in mitigating particulate emission from diesel vehicles and reduces GHG (Green House Gas) emissions significantly. In view of this, the BDAI also seeks implementation of the pending National Policy on Bio-fuels. According to the industry players, the government should realize that European countries like UK, Germany, France and others have mandated the use of biodiesel of up to 7% in transport fuels and is planning to increase the same to much higher levels in the years to come. This has led to biodiesel being sold at a price premium to diesel in these countries. In India, which is a price sensitive market, a higher cost of biofuel to diesel will not work more so with no mandate to reduce pollution. The excise duty exemption that existed ensured that biodiesel was sold at price parity or even discount to diesel ensuring off take till the biodiesel market matured in India. Now the whole biofuel program will fail despite all the stakeholders namely OMCs, Railways etc and the producers having invested substantially in this renewable energy business due to the 18% GST.” Another adverse impact of higher rate on biodiesel would be reduction in absorption  of Used Cooking Oil (UCO) in the biofuel industry. India produces nearly 22 million tonnes of oil and nearly 2 million tonnes of UCO is available for blending. Oil seeds from tribal areas can also be used for the blending and that provides huge income opportunities in those areas. The UCOs are major health problem resulting in obesity, hearth and cancer in masses. The UCO could be used as a feedstock to manufacture Biodiesel. The large quantity of UCO provides huge scope for blending and that can further enhance biofuel economy. While reducing health hazards, blending of UCO helps in Swachch Bharat drive also.  Hence, a 18 % GST on biodiesel would have cascading effect and adversely impact the green and clean campaigns and missions. We believe that the decision to put a high rate at this stage is irrational. The best way forward would be  “The government should initially promote the industry and make the use of green fuel mandatory. The next phase would have seen capacity building and huge surge in the consumption of Biofeusl. At this point of time, the government would have in a better position to collect tax.