India plans to end taxes on U.S. ethane and liquefied petroleum gas (LPG) imports under broader negotiations with Washington as it looks to reduce its trade surplus and ease its tariff burden, three sources familiar with the matter said.
The proposal to get rid of duties for the products used for cooking gas and petrochemical production comes as India mulls scrapping import tax for US liquefied natural gas (LNG) and boosting purchases of the fuel from the United States.
As President Donald Trump's sweeping duties rattle economies and markets, several Asian countries running trade surpluses with Washington are looking to import more U.S. energy in hopes of avoiding heavier tariffs.
India levies import taxes of 2.5% on ethane, mainly used as a feedstock for producing petrochemicals, and propane and butane, which are used for LPG used mostly as cooking fuel.
In the 2023-24 fiscal year, India imported 18.5 million metric tons of LPG worth $10.4 billion, according to Indian government data, mostly from the Middle East.
It is the No.2 buyer of U.S. ethane after China, according to the U.S. Energy Information Administration, importing 65,000 barrels per day last year, compared with 227,000 bpd for China. However, the U.S.-China trade war has sent tariffs surging and is likely to curtail China's imports.
Reliance Industries, which operates the world's largest petrochemicals complex, is India's main buyer of ethane.
New Delhi and Washington agreed in February to work on the first phase of a trade deal to be concluded late this year, with a view to growing bilateral trade to $500 billion by 2030 and reducing India's $45.7 billion trade surplus.
The government sources said a final decision on duty cuts will be taken by commerce and finance ministry officials. All three spoke on condition of anonymity due to the sensitivity of the talks.
India's finance and commerce ministry did not respond to Reuters emails seeking comments.
Analysts say there is limited scope for India to increase U.S. ethane imports in the short term due to a lack of ships, storage tanks and crackers that process the liquid gas.
"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," said Cheryl Liu, an analyst with Energy Aspects.
India's steam cracker capacity is around 9.5 million metric tons of ethylene production, which can accommodate up to 2 million tons (92,000 bpd) of ethane as feedstock, she said.
It is logistically easier to import more LPG, said Prashant Vashisth, vice president at Moody's affiliate ICRA. India imports about 60% of its LPG needs.
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