Against the backdrop of a runaway rise in fuel prices and global warming, the union cabinet has approved a proposal to double the amount of ethanol to be blended with petrofuels from 10 per cent, scheduled from October 2008, to 20 per cent by 2017, and a uniform 4 per cent sales tax across the country.

The policy also stipulates a certification mechanism for the blending exercise conforming to specifications of the Bureau of Indian Standards.

While petrol will be blended wiith ethanol from molasses, non-edible oils extracted from wild plants like jatropha, referred to as biofuels, will be mixed with diesel, to progressively reduce the country's dependence on imported petroleum fuels.

India currently imports 70 per cent of its fuels to meet its requirments of 40 million tonnes of diesel and between 8 and 9 million tonnes of petrol. Fuel consumption has been rising by around 7 per cent annually.

At present the country has a target of blending 5 per cent of ethanol by volume in petrol, which is scheduled to double to 10 per cent by October, in time for the forthcoming sugarcane crushing season.

Though the policy of blending 5 per cent ethanol in petrol was has been successful, the blending of biodiesel has been stalled by ministerial differences over subsidies, leading several investments in bio diesel refing being put on the back-burner.

Significantly the policy has suggested removing all central taxes on bio-diesel and accord `declared goods' status to biofuels that would ensure a uniform 4 per cent sales tax (VAT) on the product across states. As per the policy, a certification mechanism would be put in place for the blending exercise that would have to conform to BIS specifications.

The union cabinet has also aproved the setting up of an empowered national biofuel coordination committee, headed by the prime minister and a biofuel steering committee headed by the cabinet secretary.

The policy was steered by the ministry of new and renewable energy and a draft policy was considered by a group of ministers under the chairmanship of agriculture minister Sharad Pawar.

The hoghlights of the national biofuel policy are:

• An indicative target of 2 per cent by 2017 for the blending of biofuels – bio-ethanol and bio-diesel has been proposed
• Bio-diesel production will be taken up from non-edible oil seeds in waste / degraded / marginal lands
• The focus would be on indigenous production of bio-diesel feedstock and import of free fatty acid (FFA) based products like oil, palm, etc, would not be permitted
• Bio-diesel plantations on community / government / forest waste lands would be encouraged while plantation in fertile irrigated lands would not be encouraged
• Minimum support price (MSP) with the provision of periodic revision for bio-diesel oil seeds would be announced to provide fair price to the growers. The details about the MSP mechanism, enshrined in the national biofuel policy, would be worked out carefully subsequently and considered by the bio-fuel steering committee
• Minimum Purchase Price (MPP) for the purchase of bio-ethanol by the oil marketing companies (OMCs) would be based on the actual cost of production and import price of bio-ethanol. In case of bio-diesel, the MPP should be linked to the prevailing retail diesel price
• The national biofuel policy envisages that bio-fuelsmay be brought under the ambit of ''declared goods'' by the government to ensure unrestricted movement of bio-fuels within and outside states
• It is also stated in the Policy that no taxes and duties should be levied on bio-diesel
• The national biofuel coordination committee to be chaired by the prime minister would comprise the deputy chairman of the Planning Commission and ministers from the following seven ministeries - new and renewable energy, rural development, agriculture, environment and forests, petroleum and natural gas, science and technology, with the secretary, ministry of new and renewable energy would be the convener.