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LNG fighting a losing battle in India

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LNG Industry,

Bloomberg is reporting that a province governed by India’s Prime Minister Narendra Modi for 13 years is impeding his plans to promote clean energy.

Modi’s effort to make LNG more affordable, by halving its import tax in the government’s annual budget 1 February, is being impeded by the withdrawal of tax benefits by the western Indian state of Gujarat, through which 90% of the LNG used in India passes.

Loss of the state concession has resulted in higher prices for domestic and industrial consumers across the country. It has also sparked criticism from environmental groups, who fear it will hurt the competitiveness of gas and discourage use of the cleaner fuel. India is struggling to follow the US and Europe in giving natural gas a greater role as it fights air pollution.

Levies across the country add about 40% to the delivered price of LNG by the time it reaches the end user.

Currently, import taxes are levied on LNG but not crude. That along with other levies makes natural gas uncompetitive, and unless there is a level playing field, the required investment in infrastructure will not be made.

Gujarat, which houses the nation’s biggest LNG import terminals – Petronet LNG’s 15 million tpy facility in Dahej as well as Shell Gas BV and Total Gaz Electricite Holdings’s 5 million t plant – withdrew the tax waiver on imported fuel consumed outside the province in November. 

The withdrawal of the tax credit has resulted in an effective value-added tax rate of 15% from 4% earlier.

That prompted Indraprastha Gas Ltd. to raise prices of compressed natural gas and piped natural gas.

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