In view of the recommendation made by the ministry of petroleum and natural gas for the removal of VAT and sales tax on bio-fuel, the Planning Commission has said in case of any fluctuations in prices, the losses suffered by oil companies should be borne by the government.
"While the suggestion made by the petroleum ministry is viable, it may ask oil companies to have a 10-year buy back arrangement for bio-fuel such as jatropha among others," a Planning Commission official said. The proposal is likely to be sent to the Cabinet shortly.
Earlier the price of bio fuel was much higher than the price of diesel and petroleum, preventing it from being a viable alternative to the conventional fuel.
The recent hikes in petroleum prices have tilted the argument in favour of bio fuels and the government has been looking at ways and means to subsidise it.
Some states have already put up pilot projects for harvesting oil seeds and producing bio fuel and have also made available wasteland to self help groups for energy plantations.
There is a demand to make bio-fuel economically viable, as it will help in increasing the avenues of employment and also in sustaining petroleum costs.
"The government believes that in the long run, bio fuels will help in providing fuel security for the country, and also help in improving rural incomes and jobs and put in place environment-friendly mechanisms," the official added.
The mechanism being considered is the long-term buy back arrangement from producers, as it will encourage mass cultivation of oil seeds. The bio-fuel programme has evoked wide interest and the southern railways have been running two passenger locomotives with a 5 per cent blend of bio-fuel.
In order to make bio fuel successful, officials believe that organised growing of these oilseeds on private fields, wastelands, canals, tank bunds, degraded forests and along railway tracks and highways must be encouraged.
