India is weighing the possibility of eliminating import taxes on liquefied natural gas (LNG) from the United States to encourage purchases and address a trade surplus that has been a point of contention for President Donald Trump, according to government and industry insiders.
The U.S. is India's second-largest LNG supplier after Qatar, and both nations aim to expand energy trade to fuel India’s rapidly growing economy. During Prime Minister Narendra Modi’s visit to Washington last month, India committed to increasing U.S. energy imports by $10 billion, pushing the total to $25 billion in the near term. The two leaders also set an ambitious $500 billion bilateral trade target by 2030.
By scrapping the 2.5% basic customs duty and the 0.25% social welfare tax on U.S. LNG—similar to existing agreements with the UAE—India hopes to make American gas more cost-competitive and reduce its $45.4 billion trade surplus with the U.S.
“We are considering lifting the import tax on U.S. LNG under a bilateral trade agreement, mirroring our model with the UAE,” a source familiar with discussions revealed. The Indian oil and finance ministries have yet to comment on the matter.
Unlike Canada and the European Union, which have taken a more defensive stance on U.S. trade policies, India is actively seeking to accommodate the Trump administration’s demands, with potential tariff reductions on over $23 billion worth of American imports, as reported by Reuters.
China’s recent 15% tariff on U.S. LNG could also redirect shipments toward India, where demand is projected to surge by 60% between 2023 and 2030. India, the world’s fourth-largest LNG importer, brought in 25.9 million tonnes worth approximately $14.2 billion in the first 11 months of the current fiscal year. Imports are expected to reach 27-28 million tonnes by year-end, with U.S. supplies comprising 20-25% of that total.
State-owned energy giant GAIL (India) Ltd. has long-term agreements to purchase 5.8 million tonnes of LNG annually from the U.S. and is exploring further investments in American LNG infrastructure after Washington lifted restrictions on export permits for new projects. Other major Indian companies, including Indian Oil Corp and Bharat Petroleum Corp, are also in talks to secure additional LNG supplies from U.S. firms.
Beyond LNG, India is looking to boost imports of U.S. petrochemicals, ethane, propane, and butane as part of its broader energy strategy.