India is considering scrapping the US LNG import tax to boost purchases and help cut the trade surplus with Washington, government and industry sources told newswires.
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The US is India's second largest LNG supplier and the two countries are in talks to ramp up volumes to the country, one of the world’s fastest growing economies.
During Prime Minister Narendra Modi's visit to the US last month, India pledged to increase purchases by $10 bill to $25 bill in the near future, while Modi and President Trump agreed to target $500 bill in bilateral trade by 2030.
Scrapping the import tax would make US LNG more price competitive, and would also help trim India's trade surplus with the US, a government source said.
The trade surplus was $45.4 bill last year.
"We are considering ending the imports tax on US LNG under the bilateral trade agreement, similar to our model with the UAE," one of the sources said.
India currently imposes a 2.5% basic customs duty and an additional 0.25% social welfare tax on LNG, however, there is no tax levied on United Arab Emirates (UAE) and Australian supplies under bilateral agreements.
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 US imports worth $23 bill, Reuters reported last week.
In addition, China's 15% import tax imposed last month on US LNG imports could divert cargoes to India, where the International Energy Agency (IEA) forecast a 60% hike in gas use between 2023 and 2030, with imports of LNG doubling over that period.
India, the world's fourth-biggest LNG importer, imported 25.9 mill tonnes of LNG worth about $14.2 bill in the first 11 months of the current fiscal year to 31st March, government data showed.
LNG imports are on track to average about 27-28 mill tonnes in this fiscal year, with US supplies accounting for 20%-25% of the total, another source said.
India's US LNG imports are driven by state-run GAIL (India) Ltd's long term deals with US companies to buy 5.8 mill tonnes of LNG per annum.
GAIL has also publicly stated that it would revive plans to buy a stake in a US LNG plant or secure a long-term LNG deal after Washington lifted a ban on export permits for new projects.
Indian companies including GAIL, Indian Oil Corp (IOC), and Bharat Petroleum Corp (BPCL) are talking to US companies for additional LNG sourcing, Indian Oil Secretary, Pankaj Jain said last month.
India's oil ministry had asked companies to raise energy imports, wherever possible, a government source said.
Apart from LNG, India could also raise US imports of petrochemicals, ethane, propane and butane, the source said, talking with Reuters.
