Mint Explainer: Why the govt wants higher import duty on LPG, propane and butane
New Delhi: Finance Minister Nirmala Sitharaman will move a resolution in parliament on Monday to approve notifications seeking to increase import duty on liquified petroleum gas (LPG), propane and butane by amending the First Schedule of Customs Tariff Act. Mint explains the significance of the move. The government wants to increase import duties on certain products to reduce import bills, protect domestic industries, and generate employment.
These measures, it hopes, will also give the domestic industry a competitive edge over imports. The government hopes the move will incentivise investments in domestic supply chains and manufacturing, which would increase employment and save foreign currency. Through notifications dated 30 June and 1 July, the central government had raised the basic customs duty on domestic LPG to 15% from 5%.
It had also imposed an agriculture infrastructure and development cess (AIDC) of 15% on the import of LPG cylinders. The government also raised the import tariff on propane for commercial use to 19.25% from 2.75% on 1 July. The customs-duty hike will not apply to imports of liquefied propane, liquefied butane and a mixture of liquefied propane and liquefied butane by state-owned oil companies such as Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation., which use these imports to supply to domestic consumers.
India depends on LPG imports to meet its domestic needs. Countries such as the US, Saudi Arabia and others in the Middle East export LPG to India. Interestingly, the average Saudi CP, an international standard for LPG pricing, rose from $415 per million tonnes to $712 per million tonnes between FY21 and FY23, but the price hike was not passed down to
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