India Considers Waiving Import Duties on US Ethane and LPG to Bolster Trade Relations

India is considering the removal of import duties on US ethane and liquefied petroleum gas (LPG) as part of its broader trade negotiations with the United States, as per Reuters news report citing sources. 

This decision aligns with New Delhi’s aim to reduce its trade surplus and contribute to the bilateral target of achieving $500 billion in trade by 2030. The potential move also reflects India’s interest in easing tariff burdens amid shifting global trade dynamics.

US Energy Imports May Get a Boost

At present, India levies a 2.5% import tax on ethane, propane, and butane. These fuels are crucial for petrochemical production and cooking gas. In the fiscal year 2023–24, India imported 18.5 million metric tons of LPG worth $10.4 billion, mostly from the Middle East. 

However, India is also the world’s second-largest buyer of U.S. ethane, following China, having imported 65,000 barrels per day last year. With China’s imports declining due to trade tensions, India could become an even more important destination for U.S. exports.

Reliance Industries, which runs the world’s largest petrochemicals complex, remains India’s primary ethane importer. Scrapping import duties could enhance profitability and secure more stable feedstock supplies for such firms.

Growth Potential Limited by Infrastructure

Despite these trade prospects, experts highlight that India’s current infrastructure poses challenges for a rapid increase in ethane imports. 

As per news reports, India’s steam cracker capacity, currently at 9.5 million metric tons of ethylene output can only process up to 2 million tons (92,000 barrels per day) of ethane. The shortage of specialised ships and storage tanks further constrains expansion.

In contrast, expanding LPG imports appears more practical. India already imports nearly 60% of its LPG demand, and industry experts suggest that sourcing a greater share from the US is logistically feasible in the short term.

Conclusion

India’s potential removal of duties on U.S. ethane and LPG signals a strategic effort to deepen trade ties while addressing its trade surplus with Washington. 

While infrastructural limitations may restrict immediate growth in ethane imports, the LPG segment offers more immediate scalability. Final decisions will depend on reviews by India’s commerce and finance ministries, according to the news report.

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