India will cut the goods and services tax on LPG sold by the private sector to domestic consumers to 5% from 18%, effective January 25, the GST Council said on is website Thursday.
Industry sources said Friday the move, together targeting LPG subsidies based on income, would boost the competitiveness of the private sector to meet growing demand.
The change will now mean the same rate of GST for the private and public sectors, but customs duty remains 5% for LPG imported by the private sector, compared with zero for state companies.
Nonetheless, traders say they expect the move to bolster imports into India, which is already rivaling China as the world's top LPG importer.
"This could see a lot of new entrants into the Indian LPG market, including some mid-sized companies from overseas, especially LPG specialist companies," an India-based trader said.
The GST reduction, which comes ahead of the Indian budget on February 1, is part of a decision by a panel of federal and state finance minsters to revise GST rates on 29 goods and 53 services, including on old used motor vehicles and buses using biofuels.
Traders said it is also possible that major international LPG trading companies might expand their presence in India and increase imports. "I reckon the Japanese will do so," a trader said.
Trading house Itochu last year took a 19.7% stake in Mumbai-based Hindustan Aegis LPG, a wholly owned subsidiary of Aegis Logistics, for $39 million.
This is to operate a 2.5 million mt LPG terminal at Haldia, making Itochu the first Japanese company to take part in the operation of an Indian LPG terminal.
France-based oil and gas company Total also plans to invest in expanding LPG infrastructure in India, including boosting storage capacity, import terminals and the distribution network, its CEO Patrick Pouyanne said last September during a visit to India.
Total and state-run Hindustan Petroleum Corp. Ltd may revive their plan jointly to build a 60,000-mt underground LPG storage facility in Mangalore costing more than $155.99 million, the Indian media quoted HPCL Chairman MK Surana as saying.
Total, which sells lubricants and LPG in India, and HPCL has a fully integrated above-ground LPG import terminal at Mangalore since 1998.
Indian Oil Petronas Pvt. Ltd. or IPPL, a 50:50 joint venture between state-owned Indian Oil Corp. and Malaysia's Petronas, has a 31,000-mt LPG terminal at Ennore, southeast Tamil Nadu state and is expanding its LPG import/export terminal at Haldia to 36,500 mt from 31,500 mt, at a cost of $11.2 million.
IPPL is also planning to build a third LPG import/export terminal on the west coast of India, an IPPL source had said.
RISING IMPORTS
India's LPG imports in November were at 1.246 million, up 2.6% on the month and 23.4% on the year, the latest provisional data from the country's Petroleum Planning and Analysis Cell showed.
Imports between April and November last year were 7.641 million mt, up almost 12% year on year.
The growth in India's LPG imports has also attracted interest from the LPG shipping sector.
BW LPG Ltd, the world's largest owner of VLGCs based on vessel number and LPG-carrying capacity, last July formed a 50:50 joint venture in India with Global United Shipping India Pte. Ltd.
The joint venture -- BW Global United LPG India Pte. Ltd. -- aims to own and operate gas carriers to move LPG within Indian waters, BW LPG said.
"We believe LPG in India is a growing market," BW LPG CEO Martin Ackermann told S&P Global Platts recently. "For the next couple of years, we will likely see 7-10% year-on-year growth."
