india-may-scrap-import-tax-on-us-lng

India is considering removing the import tax on liquefied natural gas (LNG) from the United States to encourage higher imports and reduce its trade surplus with Washington. This move aligns with India's broader strategy to expand energy imports and enhance bilateral trade relations.

 

The United States is currently India's second-largest LNG supplier, and both nations aim to increase trade volumes to meet India's growing energy demands.

 

During Prime Minister Narendra Modi’s visit to the U.S. last month, India committed to boosting U.S. energy purchases by $10 billion, raising the total to $25 billion in the near future. Both leaders also set a target of $500 billion in bilateral trade by 2030.

 

Scrapping the import tax would make U.S. LNG more competitive in India and help lower its trade surplus with the U.S., which stood at $45.4 billion last year.

 

Currently, India imposes a 2.5% basic customs duty and an additional 0.25% social welfare tax on LNG imports. 

 

However, imports from the UAE and Australia are exempt under bilateral trade agreements. A similar arrangement with the U.S. is under discussion.

 

Government and industry sources suggest that India is actively considering this move under its trade agreements. The oil and finance ministries have not yet commented on the matter.

 

Reports indicate that India is willing to cut tariffs on over half of U.S. imports worth $23 billion to maintain a favourable trade relationship.

 

Additionally, China's recent 15% tariff on U.S. LNG imports could divert more U.S. shipments to India. The International Energy Agency estimates a 60% increase in India's gas consumption between 2023 and 2030, with LNG imports set to double in the same period.

 

India, the world's fourth-largest LNG importer, brought in 25.9 million tonnes of LNG worth about $14.2 billion in the first 11 months of the current fiscal year. LNG imports are expected to reach 27-28 million tonnes this year, with U.S. supplies accounting for 20-25% of that total.

 

India's state-run GAIL (India) Ltd has long-term contracts with U.S. suppliers for 5.8 million tonnes of LNG annually. The company is also looking to invest in a U.S. LNG facility or secure a new long-term agreement following the lifting of restrictions on export permits for new projects.