Automobile industry seeks 5% GST for 2-wheelers running on flex fuel, official says

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The automobile industry has sought 5% GST on two-wheelers running on flex fuel, at par with those powered by electric powertrains, to further the government’s push toward bringing vehicles that help reduce oil imports.

The use of blended fuel also provides farmers with an additional source of income in the world’s second largest farm output sector.

As per sources in the know, auto industry stakeholders has additionally urged the government for a price guarantee on fuel.

“The industry has sought 5% GST on flex fuel two-wheelers and price guarantee on fuel for flex fuel vehicles (FFVs). They are seeking fuel at a price 35% lower than E10 to compensate for loss of fuel efficiency, better running costs and increase customer acceptability of these vehicles,” said a senior official aware of the development.

Vehicle prices are expected to go up with the mandated implementation of E20 blends in fuel from 2025. Vehicles in India currently run on E10 blend.

Flex fuel vehicles run on petrol with higher ethanol blend (E20-E75) entailing lower consumption of fossil fuels but have lower mileage than internal combustion engine ones due to lower calorific value of the mix.

The recommendations, it is learnt, has been made by industry body Society of Indian Automobile Manufacturers (SIAM) at a time when the Ministry of Road, Transport & Highways (MoRTH) is working on a policy to encourage roll-out and adoption of flex fuel vehicles in the country.

India’s leading two-wheeler makers from Hero MotoCorp to Bajaj Auto and TVS Motor Company are set to commence mass production of one flex fuel two-wheeler each by September/October 2024. For passenger vehicles, given complexity of product mix and volume constraints, timelines for mass introduction of flex fuel vehicles have been set in April 2027.

“India is projected to witness the largest increase in energy demand of any country over the next two decades, accounting for close to 28% of incremental global growth in energy demand”, Minister of Petroleum and Natural Gas Hardeep Singh Puri said recently.

Use of ethanol, extracted from sugarcane as well as broken rice and other agri produce, will help the world’s third largest oil consuming and importing country cut its reliance on overseas shipments. India currently is 85% dependent on imports for meeting its oil needs.

Increased utilization of flex fuel for mobility needs will also provide an additional source of income to farmers who comprise 58% of the workforce in the country.

These considerations have made the Centre double down on efforts to promote the Ethanol Petrol Blending Programme (EPPB), ahead of the general elections next year.

A senior industry executive aware of the developments, however, said given that existing vehicles on-road are designed to run on E0-E10 blend, the industry has said it is imperative that the government continues to provide E10 at retail pumps till the end of life of such vehicles.

“There are 17 crore vehicles on roads which are primarily designed for E0-E10, providing E10 as a protection grade fuel at retail pumps till end of life of such vehicles is extremely critical,” he said.

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