India weighs scrapping import tax on U.S. LNG, boost purchases, sources say

Indian companies in talks with U.S. for long-term LNG deals, considering scrapping import tax to boost purchases.

India is considering a proposal to scrap import tax on U.S. liquefied natural gas (LNG) to boost purchases and help cut the trade surplus with Washington, a key irritant for President Donald Trump, four government and industry sources said.

The United States is India’s second biggest supplier, but the two sides are looking to ramp up volumes for India’s energy-hungry economy, one of the fastest growing in the world. Qatar is the top LNG supplier to India.

During Prime Minister Narendra Modi’s U.S. visit last month, India pledged to increase U.S. energy purchases by $10 billion to $25 billion in the near future, while both leaders agreed to target $500 billion in bilateral trade by 2030.

Scrapping the import tax would make U.S. LNG more price competitive and help trim India’s trade surplus with the U.S., another government source said. The surplus totalled $45.4 billion last year.

“We are considering ending the imports tax on U.S. LNG under the bilateral trade agreement, similar to our model with the UAE,” one of the sources familiar with the matter said.

India currently imposes a 2.5% basic customs duty and an additional 0.25% social welfare tax on LNG, but tax is not levied on supplies from the United Arab Emirates (UAE) and Australia under bilateral agreements.

The sources spoke on condition of anonymity due to the sensitivity of the talks. India’s oil and finance ministries did not immediately respond to emailed requests for comment.