CHANDIGARH: The Union Ministry of Petroleum and Natural Gas has written to the governments of Punjab, Haryana and Himachal Pradesh, urging them to reconsider the fee levied on ethanol production in their respective excise policies, warning that the move may hamper the ethanol blending programme and escalate fuel prices.
The ministry, in its letters to these state governments, stated that the provision to levy a Regulatory Fee (Ethanol Permit/Pass) in their excise policies could restrict the free movement of ethanol within and outside the states. This, it noted, would ultimately increase the cost of ethanol-blended petrol.
The letters were addressed individually by Additional Secretary in the Union Ministry of Petroleum and Natural Gas, Parveen M Khanooja. The letter to Himachal Pradesh Chief Secretary Prabodh Saxena was sent on March 27, followed by a letter to Punjab Chief Secretary KAP Sinha on April 8, and another to Haryana Chief Secretary Anurag Rastogi on May 23. This newspaper has copies of all three letters.
Interestingly, of the three states, Punjab has an Aam Aadmi Party (AAP) government, Himachal Pradesh is governed by the Congress, while Haryana is ruled by the BJP.
“It has been brought to the ministry’s notice by oil marketing companies (OMCs) that as per the excise policy 2025–27 of Haryana state, there is a substantial increase in the licence fee/annual renewal fee for distilleries. Also, the aforesaid policy has introduced a fee of Rs 1 per bulk litre (BL) for issuance of pass for ethanol for mixing in petrol for use as automobile fuel."
"Additionally, an import duty of Rs 1.20 per bulk litre has also been levied. Given that ethanol is already subject to Goods and Services Tax (GST), imposing an additional excise duty would constitute double taxation, which runs contrary to sound taxation principles and could be legally untenable, especially for a production crucial to a national programme like the ethanol blended petrol programme.
"Furthermore, the increased costs resulting from the proposed fees and duty in excise policy 2025–27 are likely to raise the price of ethanol-blended petrol. Haryana and Punjab appear to be the sole states where such levies on ethanol specifically meant for blending with petrol have been imposed,” states the letter written to Rastogi by Khanooja.
Meanwhile, the Grain Ethanol Manufacturers Association has urged the Haryana government to withdraw the proposed fee on ethanol.
Speaking to this newspaper, association member Sukhpreet Grover said he and other members recently met senior officials of the Haryana government regarding the matter and are hopeful of a positive outcome.
They have been assured that the government is in discussions with oil marketing companies to absorb the duty as per the terms of contracts between OMCs and ethanol manufacturers.
“In the letter earlier submitted, we have stated that the ethanol manufacturers have contributed to the state’s commitment to achieving the target of 20 per cent ethanol-blended petrol in line with the National Mission. Now the ethanol manufacturers are working towards achieving 30 per cent blending in petrol by 2030," he added.
"The industry is struggling to survive due to high raw material costs, which have seen an unprecedented increase in the prices of feedstock in the past two years, while the ethanol sale prices are fixed by OMCs and have remained stagnant. The ethanol production in Haryana is nearly 65 crore litres annually, which will generate a marginal revenue of Rs 65 crore per annum for the state,” he said.
“We urge the complete withdrawal of the proposed Rs 1 per litre pass fee on ethanol dispatches,” Grover added.
In the letter addressed to Punjab Chief Secretary KAP Sinha, Khanooja wrote: “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. 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 licence 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) at Rs 1 per bulk litre. I would request you kindly review the excise policy and reconsider any levy/fee on fuel ethanol production/consumption/transportation in the state to facilitate smooth off-take and free movement of green fuel ethanol for the benefit of the environment and farmers.”
Similarly, the letter written to Himachal Pradesh Chief Secretary Prabodh Saxena in March stated, “The Union Government has been promoting ethanol blending in petrol to give a boost to the domestic agricultural sector and associated environmental benefits."
"Over the last decade, ethanol blending in petrol has increased from 1.5 per cent to nearly 18 per cent, and our country is on course to achieve the 20 per cent blending target by ethanol supply year (ESY) 2025–26. Himachal Pradesh has made significant contributions to the success of this programme by achieving a blending percentage of 18.5 per cent in ESY 2024–25, as on February 2025.”
“Apart from augmenting distillation capacities of existing plants, dedicated ethanol plants are being commissioned in Himachal Pradesh, providing employment opportunities and boosting the circular economy. It has been brought to the ministry’s notice by oil marketing companies (OMCs) that they have been served demand notices regarding an additional levy of Rs 1 per litre for ethanol consumption beyond 300 KL annually, as per the revised excise policy of Himachal Pradesh for 2024–25,” the letter added.
Despite repeated attempts, Haryana’s Secretary of Excise and Taxation Department Ashima Brar, Punjab’s Additional Chief Secretary (Excise) Vikas Pratap, and Himachal Pradesh Excise Commissioner Yunus were not available for comment.