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Indian Finance Minister plans to reduce customs duty on biodiesel imports, but leaders of domestic industry say the government still must increase the allowable blend past the current 5 percent.

Advocates of biodiesel in India have been cheered with news that Finance Minister Pranab Mukherjee said yesterday that the 2009-10 budget reduces the customs duty on imports of the fuel from 7.5 percent to 2.5 percent.

The decision is expected to lower prices and increase consumption; however, it could end up hurting the domestic biodiesel industry, according to a report today in Delhi Hardnews.

The lower duty is expected to increase the supply of palm oil-based biodiesel from countries such as Indonesia and Malaysia (see Indonesia, S. Korea partner for seaweed biodiesel). But the current biodiesel market is capped at a 5-percent blend of biodiesel, thanks to a long-standing mandate from the Bureau of Indian Specifications.

Industry group Biodiesel Association of India has now asked for the limit to be raised to 20 percent biodiesel in order to create a larger market. That’s the standard the Indian government has set for 2017 (see India, EU affirm new biofuels).

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