Centre asks Punjab govt to reconsider fee levied on ethanol production
The Union Ministry of Petroleum and Natural Gas has written a letter to Punjab government asking it to reconsider the fee which has been levied in the state's excise policy on production of ethanol.
The letter, accessed by The Indian Express, has been written by Praveen M Khanooja, Additional Secretary in the petroleum ministry to Punjab Chief Secretary KAP Sinha on April 8.
The letter states that the provision to levy Regulatory Fee (Ethanol Permit/Pass fee) in Excise Policy 2025-26 may restrict free movement of ethanol within and outside the state, which will further increase the cost of ethanol blended petrol.
'It has been brought to the Ministry's notice by Oil Marketing Companies (OMCs) that as per the excise policy of Punjab state, there is a substantial increase in the license fee, annual renewal fee and capacity enhancement fee for Distilleries (Part D, Para 6 a & b of Punjab's Excise Policy). Also, Para 29 'Regulatory fee on ethanol' of the Policy makes a provision to levy Regulatory Fee (Ethanol Permit/Pass fee) @ Rs. 1 per Bulk Litre,' read the letter.
The petroleum ministry pointed out that the Union government has been promoting ethanol blending in petrol to give boost to domestic agricultural sector and associated environment benefits.
'Over the last one decade, ethanol blending has improved from 1.5 per cent to more than 18 per cent and the country is on course to achieve the 20 per cent blending target by Ethanol Supply Year (ESY) 2025-26. Punjab has made significant contributions to the success of this programme by achieving a blending percentage of 18.8 per cent in ESY 2024-25, as on March 2025,' the letter adds.
It goes on to add apart from augmenting distillation capacities of existing plants, dedicated ethanol plants are being commissioned in Punjab providing employment opportunities and giving boost to circular economy.
'The increased fee in the Excise Policy 2025-26 is likely to increase the cost of ethanol blended petrol, affecting the viability of ethanol producers/suppliers and OMCs. The provision to levy Regulatory Fee (Ethanol Permit/Pass fee) in Excise Policy may restrict free movement of ethanol within and outside the state, which will increase the cost of ethanol blended petrol,' Khanooja says in the letter.
The petroleum ministry official urged the Chief Secretary to review the Excise Policy and reconsider any levy/fee on fuel ethanol production/consumption/transportation in Punjab to facilitate smooth off take and free movement of green fuel ethanol for the benefit of environment and farmers.
The dual benefits of ethanol blending — reducing carbon emissions and supporting the agricultural economy — have been highlighted by experts since long.
By promoting maize cultivation, the initiative aims to provide farmers with an alternative crop, ensuring income stability while contributing to environmental sustainability through cleaner fuel alternatives.
Ministry officials say achieving the 20 per cent ethanol blending target will reduce reliance on fossil fuels, lower greenhouse gas emissions, and align with India's climate goals.
'Increased maize cultivation and ethanol production will create employment opportunities in Punjab, particularly through the establishment of dedicated ethanol plants. Encouraging maize cultivation may diversify Punjab's agricultural landscape, reducing dependence on traditional crops like wheat and paddy, which could lead to more sustainable farming practices,' the official added.
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