India is evaluating the removal of import taxes on US ethane and liquefied petroleum gas (LPG) as part of ongoing trade negotiations with Washington. This initiative is aimed at enhancing fuel imports from the US, aligning with India’s strategy to eliminate import taxes on US liquefied natural gas (LNG), Reuters reported. Currently, a 2.5% import tax is imposed on ethane, propane, and butane, which are essential for cooking gas and petrochemicals production. In the 2023-24 fiscal year, India imported 18.5 million metric tons of LPG, primarily from the Middle East, at a value of $10.4 billion.
India ranks as the second-largest importer of US ethane after China, receiving 65,000 barrels per day last year. However, logistical hurdles pose challenges to increasing US ethane imports, given the limited ship availability, storage, and processing capacity. Cheryl Liu, an analyst with Energy Aspects, highlighted, “It will be challenging for the US to increase ethane exports to India, as India seems to have already maximised its use of ethane as a feedstock due to favourable current margins.”
Reliance Industries, a major player in India’s petrochemical sector, stands as the primary buyer of ethane, further illustrating the complexities of expanding this trade.
India’s plans are part of a broader trade agreement aimed at boosting bilateral trade with the US to $500 billion by 2030, addressing a $45.7 billion trade surplus currently in India’s favour. The final decision regarding these duty cuts will be taken by officials from the commerce and finance ministries. Despite the potential economic benefits, logistical challenges remain a significant barrier to scaling up imports of US ethane in the short term.
In February, New Delhi and Washington reached an agreement to collaborate on the initial stage of a trade agreement, expected to be finalized by the end of this year. The goal is to boost bilateral trade to $500 billion by 2030 while also addressing India’s $45.7 billion trade surplus.
According to sources within the Indian government, the final determination on tariff reductions will be made by officials from the commerce and finance ministries. Due to the delicate nature of the discussions, all parties requested to remain anonymous.
The LPG import scenario presents a more straightforward opportunity for India, as the nation imports about 60% of its LPG needs. Prashant Vashisth, vice president at Moody’s affiliate ICRA, noted that logistically, increasing LPG imports is simpler compared to ethane. This strategy aligns with India’s goal to secure a stable energy supply while negotiating favourable trade terms with the United States.
As trade talks progress, India continues to seek optimal strategies to balance its energy import needs with its trade objectives. The discussions reflect a strategic intent to diversify energy sources while capitalising on opportunities to strengthen economic ties with the United States.
