Plans for a 5ppl fuel duty rebate for 17 rural areas have cleared a major hurdle, chief secretary to the Treasury Danny Alexander has announced.

The European Commission (EC) has given its approval and the minister said he hoped the scheme could be implemented before the election in May, although it still requires agreement from other member states through the Council of the European Union.

He said: “This is great news for motorists in these areas and brings a duty discount a step closer. Even though fuel prices are falling across the country, they are still higher in very rural areas. As someone who comes from one of the most rural areas in the UK, I know that for people who live in these areas cars are a necessity, not a luxury. I’ve fought hard to reach this major milestone.

“While we have one more stage to go, I want to make sure we are ready to implement this as a top priority so we will press for this to be heard as soon as possible and are today publishing the necessary draft regulations. I’m determined to implement the rural fuel rebate in the current Parliament as part of this government’s drive for a stronger economy and fairer society.”

Brian Madderson, chairman of the PRA, commented: “The PRA welcomes the news that 17 of the UK’s most rural communities are a step closer to getting up to a 5ppl fuel price cut. The PRA has been liaising with the HM Treasury throughout this process and our members have praised our efforts on the back of today’s news.

“This is fantastic news for us and we thank the PRA for all their continued help and support,” said Ian Bown, proprietor of the Gulf branded Dalehead Garage in Hawes, Wensleydale.

Madderson continued, “The UK’s most rural islands already receive this discount, but this will be the first time ever that the Commission has approved a fuel discount on the mainland in the UK.”

The 17 areas which included in the government’s application the European Commission are based on postcodes. They are:

• IV54 (Highland – Scotland)

• IV26 (Highland – Scotland)

• IV27 (Highland – Scotland)

• NE48 (Northumberland – England)

• PH41 (Highland – Scotland)

• KW12 (Highland – Scotland)

• PA80 (Argyll and Bute – Scotland)

• PH36 (Highland – Scotland)

• IV22 (Highland – Scotland)

• PA38 (Argyll and Bute – Scotland)

• PH23 (Highland – Scotland)

• PH19 (Highland – Scotland)

• IV21 (Highland – Scotland)

• LA17 (Cumbria – England)

• EX35 (Devon – England)

• IV14 (Highland – Scotland)

• Hawes (North Yorkshire – England)

These areas have been selected using the following criteria:

• pump price threshold: pump prices have to be more expensive than the lowest pump price on the islands in the existing scheme, during the months examined

• cost of transporting fuel: areas have to be over 100 miles by road from the nearest refinery

• population density: population density must be no higher than any area in the current scheme

Areas that did not adequately fulfil these criteria were not included in the application, as the government considered them to be unlikely to receive approval from the European Commission.

The current rural fuel rebate scheme came into effect in March 2012 and allows retailers of road fuel within the Inner and Outer Hebrides, the Northern Isles, the Islands of the Clyde and the Isles of Scilly to register with HM Revenue & Customs (HMRC) to claim back a 5ppl relief on unleaded petrol and diesel for retail sale within the eligible areas.

Retailers of road fuel within the new geographical areas will be eligible to register with HMRC and to claim back up to 5ppl duty relief on purchases of unleaded petrol and diesel for retail sale within the eligible areas. They will be entitled to claim the relief from HMRC on a monthly basis.