India is considering a proposal to scrap import tax on U.S. liquefied natural gas (LNG) to boost purchases and help cut the trade surplus with Washington, a key irritant for President Donald Trump, four government and industry sources said.
The United States is India’s second biggest supplier but the two sides are looking to ramp up volumes for India’s energy-hungry economy, one of the fastest growing in the world.
During Prime Minister Narendra Modi’s U.S. visit last month, India pledged to increase U.S. energy purchases by $10 billion to $25 billion in the near future, while both leaders agreed to target $500 billion in bilateral trade by 2030.
Scrapping the import tax would make U.S. LNG more price competitive, and help trim India’s trade surplus with the U.S., another government source said. The surplus totalled $45.4 billion last year.
“We are considering ending the imports tax on U.S. LNG under the bilateral trade agreement, similar to our model with the UAE,” one of the sources familiar with the matter said.
India currently imposes a 2.5% basic customs duty and an additional 0.25% social welfare tax on LNG, but tax is not levied on supplies from the United Arab Emirates (UAE) and Australia under bilateral agreements.
The sources spoke on condition of anonymity due to the senstivity of the talks. India’s oil and finance ministries did not immediately respond to emailed requests for comment.
Unlike Canada and the European Union, India is actively seeking to appease the Trump administration as it ratchets up pressure on trading partners, and is open to cutting tariffs on over half of U.S. imports worth $23 billion, Reuters reported earlier this week.
Also, China’s 15% import tax imposed last month on LNG imports from the U.S. could divert trade of the super-chilled fuel to India, where the International Energy Agency expects a 60% jump in gas use between 2023 and 2030, with imports of LNG doubling over that period.
BIG LNG BUYER
India, the world’s fourth-biggest LNG importer, imported 25.9 million tonnes of LNG worth about $14.2 billion in the first 11 months of the current fiscal year to March 31, government data showed.
LNG imports are on track to average about 27-28 million tonnes in this fiscal year, with U.S. supplies accounting for 20%-25% of that, a third source said.
India’s U.S. LNG imports are driven by state-run GAIL (India) Ltd’s long term deals with U.S. companies to buy 5.8 million tons of LNG annually.
GAIL has also said it would revive plans to buy a stake in a U.S. LNG plant or secure a long-term U.S. LNG deal after Washington lifted a ban on export permits for new projects, part of Trump’s agenda to maximise U.S. energy development.
Indian companies including GAIL, Indian Oil Corp, and Bharat Petroleum Corp are talking to U.S. companies for additional LNG sourcing, Oil Secretary Pankaj Jain said last month.
India’s oil ministry has asked companies to raise energy imports, wherever possible, a government source said.
Apart from LNG, India can also raise U.S. imports of petrochemicals, ethane, propane and butane, the source said.
(Reporting by Nidhi Verma and Manoj Kumar Editing by Tony Munroe, William Maclean)