India’s oil marketing companies: State regulations make E5 impossible to distribute

In India, a report in the Economic Times says that oil marketing companies, which are experiencing cash flow difficulties, are unable to switch to E5 blends that would save them $1.52 for every gallon of petrol replaced with ethanol. The reason? A complex web of state regulations and tax issues , as well as entry barriers in various states.

Ear;lier this week, the central government revealed a plan to slash taxes on ethanol as an incentive to stimulate demand. Currently, excise duty is 15 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.

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