India proposes to slash ethanol taxes to stimulate demand for domestic production

In India, the Economic Times is reporting that the central government is planning to slash taxes on ethanol as an incentive to stimulate demand. Currently, excise duty is 16 percent, plus state taxes of 4 to 20 percent, plus import fee, permit fee, license fee, administration fee and state excise taxes.

The proposal on the table would eliminate all inter-state taxes and duties. The goal of the program is to make domestic ethanol competitive with imports, which are typically 30 percent less expensive.

The E10 mandate scheduled for October 2008 has been championed by the Agricultural ministry as a means of handling the nation’s severe sugar overproduction. India is projected to have a surplus of 11.5 million tonnes, based on a projected 33.15 million tonnes harvest this year, which would be a world record for national sugar production. Recently, 10 sugar-producing states have agreed to a framework for a national E10 mandate. India’s sugar crop this year is expected to exceed 29 million metric tons. With domestic consumption at 19 million tons and exports at 1.5 million tons, the country is turning to ethanol production to avoid a catastrophic sugar glut.

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