In Trade Negotiations, India Thinking of Eliminating Import Tariff on US LPG and Ethane

As part of continuing trade talks with Washington, India is considering eliminating import levies on US liquefied petroleum gas (LPG) and ethane. According to media reports, this move is intended to increase fuel imports from the US and is consistent with India's plan to remove import duties on US liquefied natural gas (LNG). Butane, propane, and ethane—all necessary for the production of petrochemicals and cooking gas—are currently subject to a 2.5% import tariff. India bought 18.5 million metric tonnes of LPG, mostly from the Middle East, for $10.4 billion in the fiscal year 2023–2024. With 65,000 barrels per day last year, India is now the second-largest importer of US ethane after China. However, due to restricted ship availability, storage, and processing capacity, logistical problems make it difficult to increase US ethane imports. Energy Aspects analyst Cheryl Liu pointed out that it will be difficult for the US to boost ethane shipments to India. It is because India appears to have already maximised its usage of ethane as a feedstock due to advantageous present margins. The main purchaser of ethane, Reliance Industries, a significant participant in India's petrochemical industry, highlights the difficulties in growing this trade.

India Aims to Broaden its Bilateral Trade with US

India's intentions are a part of a larger trade pact that aims to offset a $45.7 billion trade surplus that now favours India by increasing bilateral trade with the US to $500 billion by 2030. Officials from the finance and commerce ministries will make the final judgement on these duty reductions. Logistical issues continue to be a major obstacle to increasing US ethane imports in the near future, notwithstanding the possible economic advantages. Washington and New Delhi agreed in February to work together on the first phase of a trade deal that is anticipated to be completed by the end of this year. In addition to resolving India's $45.7 billion trade imbalance, the objective is to increase bilateral trade to $500 billion by 2030. Sources inside the Indian government claim that representatives from the finance and commerce ministries would ultimately decide whether to lower tariffs.

LPG Import the Right Choice for India

Given that India imports over 60% of its LPG needs, the import scenario offers a simpler opportunity for the country. In terms of logistics, it is easier to increase LPG imports than ethane, according to Prashant Vashisth, vice president of Moody's affiliate ICRA. This approach supports India's objective of negotiating advantageous economic terms with the US while securing a steady energy supply. India keeps looking for the best ways to strike a compromise between its trade goals and its energy import requirements as trade negotiations move forward. The conversations reveal a calculated desire to increase economic relations with the United States while diversifying energy sources.