Home / Politics / Policy /  Government may propose 10-year tax holiday on clean fuel, engines

New Delhi: Prime Minister Narendra Modi has instructed ministers to draft a policy proposal that would promote clean fuel and auto engines, including a possible 10-year tax holiday for stakeholders.

“In one of the cabinet meetings, the prime minister told me and the finance minister to prepare a policy for clean fuel and clean engines. This may include exemption from all taxes for 10 years. I am trying for that," roads minister Nitin Gadkari told a conference on sustainable fuels and internal combustion engines on Monday. “A cabinet note on the issue is likely within a month."

Modi’s instruction is in line with the National Democratic Alliance government’s thrust on new and renewable energy and a clean environment.

Alongside, Gadkari said, the government plans to introduce a bill in the next session of Parliament seeking to develop inland water transport and reduce India’s dependence on conventional fuel and road transport.

The bill will propose converting 101 rivers into inland waterways. At present, the country has five waterways. The first of the 101 new waterways is likely to be built between New Delhi and Agra, Gadkari said.

Gadkari’s comments follow a 16 January cabinet decision allowing private manufacturers of biodiesel to sell directly to users such as Indian Railways, seeking to increase the supply of environment-friendly fuels in the country. Until the decision, only state-owned oil firms and private firms with at least 2,000 crore of investment in oil infrastructure were allowed to retail petrol and diesel.

Additionally, India has an ambitious plan to put 6 million electric vehicles on roads by 2020. Although the plan was announced by the erstwhile government led by Manmohan Singh, Mint reported on 8 January that the centre may set aside as much as 1,400 crore, including allocations to other existing schemes, in the budget to launch the country’s electric vehicle journey.

India is the third most polluting country in the world, after the US and China, who have signed a major bilateral climate deal in November, where the US will reduce its emissions by 26-28% below its 2005 level by 2025 and China will reach the peak of its harmful carbon dioxide emissions around 2030.

India, too, is gearing up to meet the climate change challenge, and in November, the National Green Tribunal announced that it will ban vehicles older than 15 years from New Delhi’s roads. This has been subsequently challenged by the centre.

The planned new policy on clean fuel and engines is expected to strengthen India’s case on climate change.

Gadkari said a tax exemption will make it attractive for people to get into manufacturing technologies for clean fuel and engines. “There will be a tax holiday on engines and fuel for 5+5 years. But, the finance minister won’t tell me if it will come in the budget or not," Gadkari said.

The government’s focus on clean fuel also stems from the fact that India has an energy import bill of around $150 billion, which is expected to reach $300 billion by 2030.

India imports 80% of its crude oil and 18% of its natural gas requirements. Fuel forms a major chunk of India’s overall imports. Reducing dependence on it will improve the fiscal deficit situation. “This will help us save on country’s import...new employment opportunities will come up, our GDP (gross domestic product) will increase," Gadkari said.

Vishnu Mathur, director general of the lobby group Society of Indian Automobile Manufacturers, welcomed the move.

“I am happy. It is a positive move as far as we are concerned. At least someone is thinking in that direction. These are the areas we really need to focus on," Mathur said. “The new technology will have to be commercially viable and we hope this policy talks about how to do it."

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