Sources say India is considering scrapping the import tax on US LNG to boost purchases.

Four government and industry sources have said that India is considering scrapping the import tax on U.S. LNG to increase purchases and reduce the trade surplus, which is a major irritation for President Donald Trump.

Both sides want to increase volumes in order to meet the energy needs of India's fast-growing economy. Qatar is India's top LNG supplier.

India and the United States agreed that they would increase their energy purchases in the U.S. by $10 to $25 billion over the next few years. Both leaders also agreed to reach $500 billion of bilateral trade by 2030.

Another government source stated that the elimination of the import tax would help India reduce its trade surplus with the U.S. and make U.S. gas more competitive. The surplus was $45.4 billion in 2013.

One of the sources with knowledge of the issue said, "We are looking at ending the import tax on U.S. LNG as part the bilateral trade agreement. This is similar to the model we have with the UAE."

India imposes a basic duty of 2.5% and 0.25% additional social welfare tax on LNG. However, tax is not imposed on LNG supplied by the United Arab Emirates (UAE), or Australia as per bilateral agreements.

Sources spoke under condition of anonymity because the discussions were sensitive. The Indian oil and finance ministers did not respond immediately to emails seeking comment.

India, unlike Canada and the European Union is actively trying to appease Trump's administration, which is increasing pressure on trading partners. India is willing to reduce tariffs on more than half of U.S. imported goods worth $23 billion. This was reported earlier this week.

The 15% tax that China imposed on LNG imports last month could also divert trade to India. According to the International Energy Agency, India's gas consumption is expected increase by 60% between 2023 and 2030. Imports of LNG are expected double during this period.

BIG LNG BUYER

India, which is the fourth largest LNG importer in the world, imported 25,9 million tonnes worth $14.2 billion during the first 11 month of the current fiscal period, ending March 31.

A third source reported that LNG imports will average around 27-28 millions tonnes this fiscal year. U.S. supplies are responsible for 20-25% of those, the source added.

GAIL (India) Ltd, the state-run company that controls India's LNG imports from the U.S., has long-term agreements with U.S. firms to purchase 5,8 million tons of LNG per year.

GAIL said that it would also revive plans to purchase a stake in an U.S. Liquefied Natural Gas plant or to secure a long term U.S. Liquefied Natural Gas deal, after Washington lifted the export ban for new projects as part of Trump’s agenda to maximize U.S. Energy Development.

Oil Secretary Pankaj Jain stated last month that Indian companies such as GAIL, Indian Oil Corp., and Bharat Petrol Corp. are in talks with U.S. firms to source additional LNG.

A government source revealed that the Indian oil ministry had asked companies to increase energy imports wherever possible.

The source stated that India could also increase U.S. imports petrochemicals such as ethane and propane, butane and butane.

(source: Reuters)