India is considering a dramatic policy change in the form of eliminating import duties on U.S. liquefied natural gas (LNG). The possible action would promote trade between the two countries and make U.S. LNG cheaper to sell in India.
By government sources, talks are being held to scrap the 2.5% import duty currently levied on shipments of LNG. The move comes as part of India’s overall strategy to diversify its energy sources, cut dependence on coal, and address its increasing industrial and domestic energy needs in an efficient manner.
Major Implications:
Trade Relations: Further consolidation of relations with the U.S. and a narrowing of India’s trade surplus with the nation.
Energy Pricing: Reducing the import duty can make U.S. LNG more competitive for Indian consumers.
Market Competition: Fostering more competition among LNG suppliers, which would result in improved pricing and availability.
Economic Growth: Facilitating industrial growth by ensuring a consistent and economical energy supply.
India’s demand for LNG has been growing steadily, with imports contributing almost 50% of its gas consumption. The nation is also making significant investments in developing its LNG infrastructure, such as regasification terminals and distribution systems.
U.S. LNG producers, including Cheniere Energy and Tellurian Inc., stand to gain from this policy change. An exemption from taxation would provide American firms with a competitive advantage over other key LNG exporters, including Qatar and Australia.
This step is likely to fit India’s objective of raising the proportion of natural gas in its energy basket from 6% to 15% by 2030. It would also complement the shift towards cleaner energy and lower carbon emissions.
If the government goes ahead with this plan, LNG-dependent industries like power generation, fertilizers, and petrochemicals can look forward to cost savings. The decision will be finalised in the next few months as officials deliberate on economic and geopolitical considerations before approving the tax exemption.
By taking this tax withdrawal into account, India is setting itself up as a global player in the LNG market while maintaining long-term energy security and competitiveness for its industries and consumers.
