Bid to end tax anomaly between biogas, natural gas to promote green fuel

Bid to end tax anomaly between biogas, natural gas to promote green fuel

Subject : Environment

Section: Climate change

Context: In a bid to clear the tax anomaly between biogas and natural gas when blending for use as auto fuel (compressed natural gas), Finance Minister has proposed exemption in excise duty on CNG to the extent equal to the GST paid on biogas or compressed biogas, subject to conditions.

More on the News:

• Currently natural gas falls under the value-added tax (VAT) regime, while biogas attracts GST.
• The Government has been promoting the use of compressed biogas as an alternative green transport fuel, which is produced through anaerobic decomposition of waste/ biomass sources, including municipal solid waste.
• The Ministry of Petroleum and Natural Gas had launched the ‘Sustainable Alternative Towards Affordable Transportation’ (SATAT) initiative on October 1, 2018, aimed at establishing an eco-system for the production of compressed biogas from waste/ biomass sources and promote its use along with natural gas.
• Subsequently, the ministry had issued guidelines for co-mingling of domestic gas, for supply through city gas distribution networks, with compressed biogas. However, due to the tax discrepency, the blending had not taken off.
• The Budget has attempted to address the blending issue of CBG in PNG by exempting GST-paid CBG from excise duty in order to boost green mobility even further. This also works as cost rationalisaiton for CBG producers.

SATAT Scheme

• It was launched in 2018 by the Ministry of Petroleum & Natural Gas in association with Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd.
• It envisages targeting production of 15 MMT of CBG from 5000 plants by 2023.
• It aims to set up Compressed Bio-Gas production plants and make CBG available in the market for use as a green fuel.

Compressed Bio-Gas (CBG)

• Bio-gas is produced naturally (through a process of anaerobic decomposition) from waste / bio-mass sources like agriculture residue, cattle dung, sugarcane press mud, municipal solid waste, sewage treatment plant waste, etc.
• After purification, it is compressed and called CBG, which has high methane content.
• It is exactly similar to the commercially available natural gas in its composition and energy potential.
• It can be used as an alternative, renewable automotive fuel with similar calorific value and other properties similar to CNG.