India is reportedly contemplating the removal of import taxes on liquefied natural gas (LNG) from the United States. This initiative is being considered to align with India’s pledge to increase energy imports from the US, a key priority in the strategic partnership between the two nations.

The proposal comes at a time when India, one of the world's fastest-growing economies, is experiencing a surge in energy demand. The United States has emerged as a crucial LNG supplier to India, ranking as the second-largest.

To further solidify this relationship, Prime Minister Narendra Modi, during his recent visit to the US, committed to increasing energy purchases from the US by $10 billion to $25 billion soon. Both leaders have also set an ambitious target of achieving $500 billion in bilateral trade by 2030.

Currently, India imposes a 2.5% basic customs duty and a 0.25% social welfare tax on LNG imports. However, exceptions are made for supplies from the United Arab Emirates (UAE) and Australia under existing bilateral agreements. The proposed tax removal would extend similar preferential treatment to US LNG, making it more price-competitive in the Indian market.

The reduction or elimination of the import tax is also a significant step towards reducing India's trade surplus with the US, which stood at $45.4 billion last year. This surplus has been a point of contention for the Trump administration, which has been vocal about its concerns over trade imbalances with its partners.

Moreover, the decision could position India to capitalize on the shifting global LNG market. China’s recent imposition of a 15% import tax on US LNG could divert substantial volumes of the super-chilled fuel to India, where the International Energy Agency (IEA) forecasts a 60% increase in gas consumption between 2023 and 2030, with LNG imports doubling during the same period.

State-run GAIL (India) Ltd plays a pivotal role in India’s LNG imports from the US, with long-term agreements to purchase 5.8 million tonnes annually. GAIL has also expressed interest in acquiring a stake in a US LNG plant or securing additional long-term supply deals, particularly following the lifting of export permit restrictions by Washington.

Indian Oil Corp and Bharat Petroleum Corp are also actively engaged in discussions with US companies for further LNG sourcing, as confirmed by Oil Secretary Pankaj Jain. The Indian oil ministry has directed companies to maximize energy imports, where feasible, to bolster energy security.

Beyond LNG, India is also exploring opportunities to increase imports of petrochemicals, ethane, propane, and butane from the US, further diversifying its energy portfolio and strengthening bilateral trade relations.