The Government of India Proposed to Cut Import Duty on LNG, Propane, Butanes to 2.5% from 10% from May 1, 2022

Rising inflationary pressure on consumers have been a major concern for Indian government since a long time, which has eventually reduced the overall spending of end users. During the recent budget session, finance minister of India has proposed to reduce import duty on imports of LNG, Propane and Butane from 10% to 2.5% from May 1, 2022. This decision is likely to inject boost in imports of these gases and help country’s aim to become gas-based economy.

During this budget session, Indian government tried to bring reforms that can ease imports of some petrochemicals, which can boost the process of reducing overall emission of the country. Reducing import duty on LNG, Propane and Butane will lead into the cheaper availability of these commodities, while other fuel alternatives like coal are rising in the meantime. India is the second largest coal importer, as power generation in India is largely based on coal, high coal price has been affecting production of all commodities in India and building up inflationary pressure on consumers. Therefore, this decision of reducing import duty may shift producers from coal to gas.

As per ChemAnalyst analysis, rising input cost has increased the prices of several commodities in India despite of low demand from downstream sectors. Prior to the budget session, industrial experts heard urging to the government to bring LNG under Goods and Service Tax (GST) regime in order to boost the consumption of environment friendly fuel in the country. However, this new decision of cutting prices on imports would provide some marginal ease to the consumers in coming months. In addition, not only abovementioned gases but Methanol and Acetic Acid are also going to be cheaper in coming months, being a highly used raw material, procurers may further feel ease in their input cost.