India assesses the abolition of import taxes on American ethane and liquefied petroleum gas (LPG) as part of the current trade negotiations with Washington. This initiative aims to improve fuel imports from the United States, aligning India’s strategy to eliminate American liquefied natural gas import taxes (LNG), Reuters reported. Currently, an import tax of 2.5% is imposed on ethane, propane and butane, which are essential for the production of cooking and petrochemicals. During the year 2023-24, India imported 18.5 million metric tonnes of LPG, mainly from the Middle East, with a value of $ 10.4 billion.
India ranks like the second largest importer in American ethane after China, receiving 65,000 barrels per day last year. However, logistical obstacles pose challenges to the increase in American ethane imports, given the limited availability of ships, storage and processing capacity. Cheryl Liu, analyst with energy aspects, stressed: “It will be difficult for the United States to increase exports of ethane to India, because India seems to have already maximized its use of ethane as a raw material due to current favorable margins.”
Reliance industries, a major player in the Indian petrochemical sector, is the main buyer of ethane, illustrating more the complexities of the expansion of this trade.
India plans are part of a larger trade agreement aimed at stimulating bilateral trade with the United States at $ 500 billion by 2030, on a trade surplus of $ 45.7 billion currently in favor of India. The final decision concerning these rights reductions will be taken by officials of the Ministries of Commerce and Finance. Despite the potential economic advantages, logistical challenges remain an important obstacle to increase imports of American ethane in the short term.
In February, New Delhi and Washington concluded an agreement to collaborate on the initial phase of a trade agreement, which should be finalized by the end of this year. The objective is to increase bilateral trade to $ 500 billion by 2030 while also attacking a trade surplus of $ 45.7 billion in India.
According to sources in the Indian government, the final determination on prices reductions will be carried out by officials of the Ministries of Commerce and Finance. Due to the delicate nature of discussions, all parties asked to remain anonymous.
The LPG import scenario has a simpler opportunity for India, because the nation imports around 60% of its LPG needs. Prashant Vashisth, vice-president of Moody’s Affiliate Icra, noted that, logistically, the increase in LPG imports is simpler compared to ethane. This strategy is aligned with India’s objective to guarantee a stable energy supply while negotiating favorable commercial terms with the United States.
As commercial negotiations are growing, India continues to seek optimal strategies to balance its energy import needs with its commercial objectives. Discussions reflect a strategic intention to diversify energy sources while capitalizing on the opportunities for strengthening economic ties with the United States.
