India may drop import tariffs on US energy in push for major trade deal: Report

India eyes ending import tax on US ethane and LPG in trade talks

India is planning to eliminate taxes on imports of US ethane and liquefied petroleum gas (LPG) as part of broader trade negotiations with Washington, according to three sources cited by Reuters. The move aims to help narrow India’s trade surplus with the US and reduce its overall tariff load.

India is considering a proposal to remove import duties on products like cooking gas and petrochemical feedstocks, as it also weighs eliminating tariffs on US liquefied natural gas (LNG) and increasing its LNG imports from the United States reports news agency Reuters.

Amid the impact of President Donald Trump's broad tariff measures on global markets and economies, several Asian nations with trade surpluses with Washington are looking to ramp up U.S. energy imports in a bid to avoid steeper tariffs.

India currently imposes a 2.5% import tax on ethane—primarily used as a raw material in petrochemical production—as well as on propane and butane, key components of liquefied petroleum gas (LPG), which is widely used for cooking.

During the 2023-24 fiscal year, India brought in 18.5 million metric tons of LPG, valued at $10.4 billion, with the bulk of supplies coming from Middle Eastern countries, according to official data.

India ranks as the second-largest importer of U.S. ethane, following China, based on figures from the U.S. Energy Information Administration. In 2023, India imported around 65,000 barrels per day, while China received approximately 227,000 barrels daily. However, rising tariffs driven by the ongoing U.S.-China trade tensions may reduce China's future purchases.

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 Indian 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.

(With Reuters inputs)