NO.003

The Diesel and

Alternative Fuels Grants Scheme (DAFGS) commenced on 1 July 2000 and provides a major cut

in diesel and alternative fuel costs for businesses providing on-road transport services,

particularly in regional and rural Australia.

The on-road diesel grant provided under the DAFGS is available to vehicles over

20 tonnes gross vehicle mass (GVM) and transport vehicles weighing between 4.5 and 20

tonnes GVM that undertake their operations in the service of regional areas. The DAFGS

also provides grants for the use of alternative fuels such as compressed natural gas

(CNG), liquefied petroleum gas (LPG), ethanol and other renewable fuels, encouraging the

continued use of alternative fuels.

The on-road diesel grant, when combined with the reduction in diesel excise on

1 July 2000, has reduced the cost of diesel fuel for many transport vehicles by

around 24 cents per litre. The DAFGS scheme amounts to over $600 million in 2000-01.

The initial diesel grant rate applying from 1 July 2000 resulted in an effective diesel

excise (after taking into account the DAFGS grant) of 19.7 cents a litre, which was lower

than the Government’s commitment to start the scheme with an effective diesel excise

of 20 cents per litre for eligible businesses.

To preserve the real value of the grant, it will be increased to take account of

movements in the Consumer Price Index. Since provision for indexation has already been

made in the Budget forward estimates, this measure is already fully funded.

The Government has put forward regulations that will adjust all the DAFGS grant rates

in line with increases in the CPI. Subject to approval from the Governor-General, the

indexation arrangements will apply from 1 February 2001.

31 January 2001

CANBERRA