India sees room to remove tariffs on US imports of crude oil, diamonds under trade pact

As part of this internal study, key departments of the government are analysing tariff lines between India and US

There is room to remove basic customs duties on US imports of crude oil and diamonds, and lower tariffs on automobiles under the proposed India-US Bilateral Trade Agreement (BTA), which has entered a crucial stage of negotiations, an ongoing study by the Finance Ministry and NITI Aayog has found, multiple sources told Moneycontrol.

“India’s exposure to US markets is overall less. Items like diamonds are imported from the US, but after value addition India exports to them as well. Crude oil and automobiles are two other such areas. We will negotiate and not universally remove duties,” an official said.

The proposals around tariff reductions are aligned with the timeline for the first tranche of the BTA with the US, and India is not looking at April 2 (reciprocal tariffs) as any deadline, this official clarified.

Under his “Fair and Reciprocal Plan” expected to kick in from April 2, US President Donald Trump is set to levy tariffs on countries that impose high duties on American goods.

As part of this internal study, key departments of the government are analysing tariff lines between India and the US in a bid to identify areas where New Delhi can lower duties irrespective of the country’s domestic capacities, two government officials said.

“Analysing all tariff lines for India, US trade negotiations. Around 900 tariff lines are still left to be studied. The study also includes tariff lines in which India has manufacturing,” one of the officials cited above said.

This official said that meetings are being conducted at the highest level to fast-track talks for the trade deal with the US with a focus on analysing tariff rates across US exports to India.

The ongoing study is also calculating the impact of duty reductions across tariff lines between India and the US, both officials said.

The current US administration has specifically criticised New Delhi for high tariffs on automobiles, which exceed 100 percent for certain categories.

India imposes a basic customs duty of Rs 1 per metric tonne on crude petroleum oil, while for the refined versions such as petrol and diesel, it sits at 2.5 percent. Additional cesses and surcharges are levied on these items as well.

Also, polished diamonds attract a basic customs levy of 5 percent, but the rough version is duty-free.

India imported crude oil worth about $5.02 billion from the US, down over 50 percent on-year in 2023-24, while inbound shipments of diamonds fell nearly 35 percent to $3.34 billion.

BTA negotiations

India and the US are currently discussing the contours of the BTA, which is part of a new goal – "Mission 500” – aiming to more than double bilateral trade in goods and services to $500 billion by 2030, as agreed during Prime Minister Narendra Modi’s visit to America on February 13.

The two nations are looking to agree to the first tranche of a mutually beneficial, multi-sector BTA by the fall of this year.

In 2023, bilateral trade in goods and services between India and the US stood at $190.08 billion.

During Modi’s visit last month, the two nations also committed to increasing energy trade and establishing the US as a leading supplier of crude oil, petroleum products and liquefied natural gas to India.

Moneycontrol had earlier reported that India is amenable to cutting duties on a host of sectors such as gems and jewellery, automobile parts, textiles and chemicals as part of the proposed trade deal with the US. This would be in return for America lowering duties on certain products.

To be sure, New Delhi is yet to take a final call on cutting or eliminating tariffs on certain US imports as the government is still working on finalising the contours of the first tranche of the trade deal.