India to Cut U.S. Ethane, LPG Tariffs? Impact on Bilateral Ties

Q: 1. How much LPG does India import?

In the 2023-24 fiscal year, India’s LPG imports reached 18.5 million metric tons, valued at $10.4 billion, about 60% of India’s total LPG needs. India’s primary LPG suppliers are in the Middle East countries.

Q: 2. Which of the following tax is levied on imports and exports?

The federal government charges customs duty on importing and exporting goods from India. Duty is paid at the time of import and export of goods.

Q: 3. Who is the largest importer of LPG?

China is the largest importer of LPG.

With the goal of strengthening trade relations, India is considering removing import taxes on US ethane and liquefied petroleum gas (LPG) as part of more extensive trade negotiations with Washington. The primary objective is to help narrow India’s trade surplus with the US and lessen its overall tariff burden. Diversifying its energy imports will also enhance energy security.

India’s Proposal to Eliminate Import Duties on U.S. Fuels

India is considering dismissing import duties on cooking gas and petrochemical feedstocks. Reuters reports that it also proposes eliminating tariffs on US liquefied natural gas (LNG) and increasing its LNG imports from the United States.

As of now, India levies a 2.5% import tax on ethane, which is predominantly used as a raw material in petrochemical production, and on propane and butane, the main elements of liquefied petroleum gas (LPG), which is commonly used for heating and cooking.

Tariff Pressure from U.S. Drives Energy Import Strategy

On April 2, US President Trump announced reciprocal tariffs, marking a significant shift towards greater US trade protectionism. The move comes amid recent trade tensions between the two countries, particularly the US’s earlier imposition of 26% reciprocal tariffs on Indian goods. However, US President Donald Trump has announced a 90-day pause on tariff hikes for major trading nations, including India.

Given the effects of Donald Trump’s broad tariff measures on global markets and economies, many Asian nations running trade surpluses with the U.S. are aiming to boost U.S. energy imports to minimise higher tariffs.

India Among Top Buyers of U.S. Ethane, LPG

As per the official data, India imported 18.5 million metric tons of LPG, valued at approximately ₹86,632 crore ($10.4 billion), in the financial year 2023-24. The majority of supplies came from Middle Eastern countries.

Based on the U.S. Energy Information Administration figures, India is the second-largest importer of U.S. ethane after China. In the year 2023, India imported around 65,000 barrels daily, while China acquired about 227,000 barrels per day. However, China’s future purchases may decline due to rising tariffs fueled by ongoing U.S.-China trade tensions. Reliance Industries operates the world’s largest petrochemicals complex and is India’s leading buyer of ethane.

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India – U.S. Aim to Seal Trade Deal by Year-End

In February, the two nations—India and the US—agreed to collaborate on the first phase of the trade deal, which they aim to conclude by the end of this year. The primary goal is to boost bilateral trade to $500 billion by 2030 and lower India’s $45.7 billion trade surplus. Indian government sources said commerce and finance ministry officials will decide on duty cuts.

Ethane Imports Face Bottlenecks Despite Strategic Push

Some experts say India’s short-term ability to boost U.S. ethane imports is restricted because of a tank shortage, lack of ships, and crackers that liquefy gas. An Energy Aspects analyst said it will be tough for the US to increase ethane exports to India. India has already maximized its use of ethane as a feedstock due to favorable current margins. India’s steam cracker capacity is around 9.5 million metric tons of ethylene production, supporting up to 2 million tons (92,000 bpd) of ethane as feedstock.

Also Read: Trump 2.0: How US President’s Policies Could Impact India’s Economy

LPG Offers Easier Path for Energy Trade Expansion

The LPG import context presents a more straightforward opportunity for India, which imports about 60% of its requirements. Prashant Vashisth, vice president at Moody’s affiliate ICRA, said that logistically, increasing LPG imports is easier compared to increasing ethane imports. This strategy fits well with India’s purpose of securing a regular energy supply while dealing with favourable trade terms with the United States.

As trade discussions continue, India aims to develop strategies to balance its energy import requirements with its trade goals. The talks showcase the strategic objective of diversifying energy sources while capitalising on chances to boost economic partnership with the United States.

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