Gadkari Reviews Industry’s Preparedness for Launch of Ethanol and Flex Fuel Vehicles

by Subhash Narayan (Mint) The minister asked automobile manufacturers to look into ways of making ethanol and flex fuels more widely acceptable. -- Minister for road transport and highways Nitin Gadkari has asked automobile manufacturers to look into ways of making ethanol and flex fuels more acceptable to the public, citing Brazil’s successful integration of biofuels in its transportation systems.

The minister also discussed how a shift to biofuels from fossil fuels would help India become #AtmaNirbhar (self-reliant), reduce pollution, cut imports of fossil fuels, and help consumers by lowering fuel prices — all while benefiting farmers.

Gadkari chaired a meeting with representatives of the Society of Indian Automobile Manufacturers (SIAM) on Tuesday to review how the industry is preparing to introduce vehicles that run on ethanol and flex fuels in the coming months.

A key challenge for automakers is the goods and services tax for flex fuel engine vehicles. The ministries of heavy industries and road transport and highways have been considering recommending a rationalisation of GST on flex fuel engine vehicles to make them more affordable and facilitate faster adoption.

The ministries have received industry representations seeking a reduction in GST, which is currently 28%. The industry is concerned that both high GST and compensation cess would make adoption of these environmentally friendly vehicles difficult.

The ministries are considering recommending that the finance ministry take up the tax rate cut proposal with the GST Council, said a person aware of the development. The GST Council consists of the finance ministers of all states and the Central government and oversees tax rates, rules and regulations.

Tax parity

A 28% GST is currently levied on conventional internal combustion engine vehicles (which run on petrol or diesel), while the levy on electric vehicles is 5%.

Industry bodies including the Indian Sugar Mills Association have asked the government to bring parity in the tax rates of flex fuel and electric vehicles as both serve the purpose of reducing or eliminating vehicular emissions while improving efficiency. Blending ethanol derived from sugarcane molasses with petrol was first mandated in the country in 2007.

Flex fuel vehicles are equipped with internal combustion engines that can operate on more than one fuel. They are primarily meant to run on ethanol and methanol or a blend of biofuels and on conventional fuels such as petrol or diesel.

In December 2021, the government advised automobile manufacturers to start production of flex fuel vehicles and flex fuel strong hybrid electric vehicles (FFV-SHEV) complying with BS-6 emission norms. An electrified flex fuel vehicle provides the option of advanced chemistry battery along with a flex fuel engine.

Gadkari had said then that guidelines for the use and development of flex fuel engines and vehicles would be formulated in line with the government's vision to reduce crude oil imports and the policy on promoting ethanol as a transport fuel. These vehicles are capable of running on a combination of 100% petrol or 100% bioethanol and their blends, along with strong hybrid electric technology in the case of FFV-SHEVs.

However, the segment is yet to pick up. In August 2023, Toyota Kirloskar Motor unveiled the prototype of the world's first BS-6 electrified flex fuel vehicle.

All petrol pumps in the country already sell 10% ethanol blended petrol and all retail fuel outlets are expected to meet the 20% ethanol blended norm by 2025. Higher levels of ethanol blending in petrol are expected to be mandated in the next five years, requiring mass availability of flex engine vehicles. READ MORE