Centre considers funding, tax support for early SAF deployment

The Centre is considering financial as well as tax support measures to encourage the early deployment of sustainable aviation fuel (SAF), industry sources told businessline.

The proposed package includes viability gap funding (VGF) for first-of-their-kind production plants and rationalisation of goods and services tax (GST) and excise duties.

Concessional finance and feedstock support linked to verified traceability and quality standards have been proposed.

As per sources, these measures form part of the upcoming National SAF Policy and market-development framework, which are being finalised.

The initiative envisages time-bound support to help create a market for SAF, especially given its high production cost, which remains a major concern for airlines and fuel producers.

Under the proposed approach, VGF would support initial production facilities, while concessional finance would help address funding requirements during the early stages of development.

Furthermore, feedstock support would be linked to verification of the origin and quality of inputs used in production.

Tax changes

Sources said that details regarding the proposed outlay, tax changes and eligibility conditions are being worked out.

The proposal assumes significance as Indian carriers prepare to meet their obligations under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) from 2027.

Separately, India has announced indicative SAF blending targets in aviation turbine fuel (ATF), initially for international flights, of 1 per cent in 2027, 2 per cent in 2028 and 5 per cent by 2030.

Meanwhile, industry estimates have cited SAF prices at two to six times those of conventional jet fuel.

Cost burden

An industry insider pointed out that the absence of supporting infrastructure and an ecosystem adds to the cost burden of SAF production.

Notably, establishing production facilities requires significant upfront investment, while access to finance remains a challenge, particularly during the early stages of development.

On official level, the Centre is considering measures to provide the push that the sector needs.

Speaking with businessline on an earlier occasion, Union Civil Aviation Minister Ram Mohan Naidu said that India holds a natural advantage in the segment, given its geographical location and feedstock availability.

“The first advantage is our geography, which allows us to become an exporter, and the second is the massive availability of feedstock,” Naidu said.

According to the Minister, India has the potential to produce SAF beyond its domestic requirements, positioning the country as a major exporter.

He also pointed to India’s skilled labour, manufacturing capabilities and refining infrastructure as factors supporting its competitiveness.

Cost of production

Nevertheless, the cost of production remains a challenge.

“SAF is more expensive than regular jet fuel, so higher volumes are required to bring down costs,” Naidu said.

The proposed policy framework is expected to cover blending obligations, sustainability criteria, feedstock standards and alignment with CORSIA, sources said.

Additionally, carbon-market integration and implementation responsibilities form part of the proposed framework.