India Considers Scrapping Import Tax on U.S. LNG to Boost Purchases

India is currently exploring a proposal to eliminate the import tax on U.S. liquefied natural gas (LNG) in an effort to increase purchases and reduce the trade surplus with the United States. This move comes as a response to President Donald Trump’s concerns about the trade deficit between the two countries, with India being the second-largest importer of U.S. LNG.

With India’s rapidly growing economy and increasing energy demands, the country is looking to enhance its energy partnership with the United States. During Prime Minister Narendra Modi’s recent visit to the U.S., India committed to boosting U.S. energy purchases by $10 billion to $25 billion in the near future, with a goal of reaching $500 billion in bilateral trade by 2030.

By scrapping the import tax on U.S. LNG, India aims to make American LNG more competitive in terms of pricing, while also addressing the trade surplus issue. Currently, India imposes a 2.5% basic customs duty and a 0.25% social welfare tax on LNG imports, but exemptions are granted to countries like the United Arab Emirates and Australia under existing bilateral agreements.

According to government sources familiar with the matter, discussions are underway to potentially waive the import tax on U.S. LNG under a bilateral trade agreement, similar to the model in place with the UAE. This move could not only strengthen energy ties between India and the U.S. but also contribute to reducing the trade surplus, which stood at $45.4 billion last year.

India’s proactive approach in addressing trade concerns with the U.S. contrasts with actions taken by other countries facing pressure from the Trump administration. In light of China’s recent imposition of a 15% import tax on U.S. LNG, India’s decision to consider eliminating tariffs on American imports reflects its willingness to engage in constructive trade relations.

With the International Energy Agency forecasting a significant increase in India’s gas consumption over the next decade, driven by a surge in LNG imports, the potential removal of import tax on U.S. LNG could further bolster India’s position as a key player in the global energy market.

As India continues to explore opportunities for expanding energy cooperation with the U.S., companies like GAIL (India) Ltd. are actively pursuing long-term agreements for LNG supply from American providers. Additionally, Indian oil companies are in discussions with U.S. counterparts to explore partnerships in petrochemicals and other energy-related sectors.

Overall, India’s consideration of scrapping the import tax on U.S. LNG underscores its commitment to fostering strong economic and energy ties with the United States, while also addressing trade imbalances and meeting the growing energy needs of its economy.

Sources: Reuters