The Government could save up to €628m a year by scrapping the process of adding dye to diesel, a social justice group has claimed.

The State spends €600m a year dying 1.25 billion litres of fuel green to separate diesel used for agricultural or industrial purposes from everyday use diesel.

It also loses around €150m a year to fuel laundering.

Social Justice Ireland said ending this process and introducing a rebate system for farmers, coach operators and road hauliers would allow the Government to redirect spending to job creation, boosting domestic demand and developing infrastructure.

It suggested a rebate system be introduced in its place, which would cost the state €48m in payments to farmers, €4m to coach operators and €70m to road hauliers.

The remaining savings of €628m could be invested in "productive activities", it said.

Director Sean Healy said continuing to pump €600m into the dyeing process was wasteful and needs to be addressed.

"Why is it that we don't go through costings and decide what is worth changing when these kinds of payments are continuing?" Mr Healy said.

"Why does that make sense to the Government when it doesn't make sense to ensure that welfare rates rise a bit or that people who are long-term unemployed be given the option of a part-time job?"

A joint Oireachtas Committee on Transport confirmed the €600m of spending in a report on the country's road haulage industry published last October.

The report stated that provisions of Irish law within the Mineral Oil Tax Regulations 2001 state that a blue dye must be added to some diesel, which turns it green.

Fuel for agricultural or industrial purposes carries lower rates of tax and duty, meaning it needs to be separated from everyday use diesel.

The state then picks up the bill from major fuel companies who carry out the dying process.