The government has decided to allow duty-free import of plant, machinery, equipment and raw material to set up plants for bio-diesel production, official sources told Business Recorder here on Wednesday.
These incentives were approved by the Economic Coordination Committee (ECC) of the Cabinet in its last meeting while considering the proposals submitted by the Ministry of Water and Power on the directives of the Prime Minister.
Sources said that Prime Minister Muhammedmian Soomro in the meeting on January 31 had directed the Alternative Energy Development Board (AEDB) and Ministry of Water and Power to formulate policy recommendations for use of bio-diesel as an alternative fuel and submit to the ECC for approval.
According to the proposals approved by the ECC, the government would go for gradual introduction of bio-diesel, blended with petroleum diesel, so as to contribute a minimum share of 5 percent of total diesel consumption by the year 2015, and 10 percent by 2025.
The oil marketing companies (OMCs) would be asked to purchase bio-diesel (B-l00) from bio-diesel manufacturers, and sell the blended product with petroleum diesel (starting with B-5) at their sale points.
Sources said that the Petroleum Ministry would come up with fuel quality standards for B-l00 and blends up to B-20. They said that the Oil and Gas Regulatory Authority (Ogra) would formulate the pricing mechanism of various blends of bio-diesel (B-5, B-10 etc) and ensure its cost-effectiveness as compared to petroleum diesel.
The government would provide buyback guarantees to bio-diesel producers at a price determined by Ogra by making it mandatory for the public sector vehicles running on diesel to use bio-diesel. All imported plant, machinery, equipment and raw material for use in production of bio-diesel shall be exempted from customs duty, income tax and sales tax.
To encourage the utilisation of bio-diesel in a phased manner and to test its sustainability a pilot project on production and sale of 100,000 tons of bio-diesel per year for use of B-5 blend as fuel for transport vehicles as a private or/and public partnership will be launched by the Ministry of Water and Power AEDB to expand the national bio-diesel program.