The Indian Sugar Mills Association (ISMA) has made a strong appeal to the government for a significant policy intervention. The association is urging the Goods and Services Tax (GST) Council to rationalise the tax structure on flex-fuel vehicles (FFVs). This move, ISMA argues, is critical for the success of India's ambitious ethanol blending programme and the broader green fuel ecosystem.
The Core Demand: Lowering the Tax Burden
Currently, flex-fuel vehicles, which are designed to run on a high blend of ethanol (up to E85) alongside petrol, attract the same GST rate as conventional passenger vehicles. This rate stands at 28 per cent, with an additional compensation cess that can take the total tax incidence even higher. ISMA contends that this high tax slab makes FFVs less attractive to consumers from a cost perspective, hindering their widespread adoption.
The sugar industry body has formally requested the GST Council to consider a substantial reduction in the tax rate for these environmentally friendly vehicles. A lower GST, they believe, would incentivise automobile manufacturers to produce more FFV models and encourage consumers to choose them, creating a sustainable market pull.
Aligning with National Energy Goals
This push for tax rationalisation is not an isolated request but is deeply tied to India's strategic energy objectives. The government has set a target to achieve 20 per cent ethanol blending in petrol (E20) by the 2025-26 supply year. Promoting vehicles that can use high-ethanol blends is a logical and necessary step to ensure there is demand for the increased ethanol production.
Aditya Jhunjhunwala, President of ISMA, emphasised that supportive policies for FFVs are essential to build a complete and viable ethanol economy. He stated that such measures would directly contribute to reducing the country's massive crude oil import bill, enhancing energy security, and lowering carbon emissions. The successful implementation of the ethanol blending programme is a cornerstone of India's commitment to cleaner energy and reduced fossil fuel dependence.
Broader Implications for the Economy and Farmers
The push for flex-fuel vehicles extends beyond the automotive and fuel sectors. A thriving ethanol programme has significant positive ripple effects. It provides a stable and lucrative additional revenue stream for sugarcane farmers and sugar mills, helping clear overdue sugarcane dues. Furthermore, it promotes investment in ethanol production infrastructure and contributes to rural economic development.
Industry experts point out that while the production of ethanol from sugarcane and grains is ramping up, the demand side needs equal attention. Without vehicles on the road that can use higher blends, the full potential of the ethanol programme cannot be realised. A GST reduction on FFVs is seen as a key demand-side stimulus that would complement the government's supply-side efforts in boosting ethanol production.
In conclusion, ISMA's appeal highlights a crucial junction in India's green fuel journey. Rationalising GST on flex-fuel vehicles is presented not merely as a tax tweak but as a strategic enabler. It could accelerate consumer adoption, provide certainty to automakers, and ensure that the hard-won gains in ethanol production translate into tangible benefits for the nation's economy, environment, and energy independence. The ball is now in the court of the GST Council to consider this proposal in its upcoming deliberations.
