India is contemplating a proposal to eliminate the import tax on liquefied natural gas (LNG) from the US to increase purchases and alleviate the trade surplus with Washington, a significant point of contention for President Donald Trump.

The US ranks as India's second-largest supplier, and both nations are seeking to enhance energy flows to meet the demands of India's rapidly growing economy.

During Prime Minister Narendra Modi's recent trip to the U.S., India committed to boosting energy imports from the U.S. by $10 billion, reaching a target of $25 billion in the near future, while both leaders agreed to aim for a total of $500 billion in bilateral trade by 2030.

Eliminating the import tax would enhance the price competitiveness of U.S. LNG and assist in reducing India's trade surplus with the U.S., according to reports. The surplus was recorded at $45.4 billion last year.

Presently, India enforces a 2.5 percent basic customs duty along with an additional 0.25 percent social welfare tax on LNG, whereas no such tax is applied to imports from the United Arab Emirates (UAE) and Australia due to bilateral agreements.

Unlike Canada and the European Union, India is actively looking to satisfy the Trump administration as it increases pressure on trade partners and is willing to reduce tariffs on over half of U.S. imports valued at $23 billion.

 

Moreover, China’s recent 15 percent import tax on LNG from the U.S. might shift the trade of this liquefied fuel to India, where the International Energy Agency forecasts a 60% rise in gas consumption from 2023 to 2030, with LNG imports expected to double during that timeframe.

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Indian firms including GAIL, Indian Oil Corp, and Bharat Petroleum Corp are currently negotiating with U.S. companies for further LNG procurement, Oil Secretary Pankaj Jain mentioned last month.