Zero import duty on natural gas, LNG imports

Earlier, zero import duty was only extended to JV of GAIL, NTPC, Petronet LNG

In a move that could give a boost to the power plants running on natural gas, the government has exempted all importers of liquefied natural gas ( LNG) and natural gas from paying import duty.

Earlier, this zero import duty was only extended to joint venture company of Gas authority of India Ltd ( GAIL)- National Thermal power Corporation ( NTPC) and Petronet LNG engaged in import of LNG and natural gas. Now this facility will be available for any entity importing natural gas and LNG for electricity generation. Such entities were earlier required to pay five per cent import duty on the value of the total imports.

However it has been clarified that import of LNG and natural gas for captive generating plants used by entities for their own industrial use will continue to pay five per cent import duty.

In order to make gas pricing attractive, the government recently took a decision to hike the price of Natural gas for all supplies from 2014 to $ 8 per mmbtu from $ 4 mmbtu currently. India aims to import up to 20 million tons a year of liquefied natural gas and has already secured deals to import about 14 million tons of LNG a year. It is currently in discussion with suppliers for an additional 20 million ton of supply, reports said.

Reportedly, India plans to spend billions to increase the capacity of import terminals for LNG to 26 million tonnes per year from 13.7 million to cope with rising imports.

There are three LNG import terminals operating in India: Shell's Hazira terminal, which is being expanded to 5 million mt/year capacity from 3.6 million mt/year; a 10 million mt/year terminal at Dahej, owned and operated by Petronet India and the 5 million mt/year-capacity Dabhol terminal, partly owned and operated by GAIL, India's largest state-owned natural gas processing and distribution company.

India is the fifth largest importer of LNG after Japan, South Korea, the United Kingdom and Spain and accounts for 5.5 percent of the total trade. Incidentally, natural gas production in India declined to 5.58 billion cubic meters from 6.03 bcm a year earlier due to fall in output by KG basins.