India Halves its LNG Import Duties

Indian finance minister Arun Jaitley announced Wednesday that the nation would be halving its import tax for LNG to 2.5 percent in order to promote a "gas-based economy."

The move will reduce import costs for Indian consumers, but also for major industrial users like petrochemical plants and power stations. “The reduction in LNG duty is welcome as it will reduce the cost of energy in the system," said Lalit Kumar Gupta, the managing director and CEO of Essar Oil. 

The move will also benefit the government itself: Indian state-owned gas company GAIL has signed contracts for the import of six million tons per annum of LNG from American suppliers Chenier and Dominion, with first cargoes due for delivery this year or next. GAIL had intended to charter newbuild LNG carriers on a build-and-operate basis for transporting the gas, including up to three vessels built in India, but it had to back away from the plan in November due to lack of interest. 

Now that it will have to charter existing vessels on the open market, GAIL may elect to swap some its contracted gas with third parties. It has issued a solicitation for "counterparties who can take/purchase volumes from GAIL on FOB basis in US . . . and deliver equivalent volumes [to] re-gasification terminals located in India." 

Midstream infrastructure developers are expected to get a boost from GAIL's contracts and from the lower import duties. Several companies are moving to create new terminals for handling LNG, including the integrator firm AG&P, which is planning a new import facility in Andhra Pradesh. We see the provision of tolled gas to supply power and fuel to factories, homes and even transport in an environmentally clean way as crucial elements of Andhra Pradesh’s future,” said Dr Jose P. Leviste, Jr., chairman of AG&P, in announcing the terminal on Monday.