PHDCCI seeks zero duty on LNG, naphtha, key feedstocks in Budget | Economy & Policy News

The PHD Chamber of Commerce and Industry (PHDCCI) has proposed eliminating basic customs duty (BCD) on liquefied natural gas (LNG), naphtha and certain heavy petroleum feedstocks, while seeking lower duties on petroleum coke used in aluminium manufacturing, as part of its pre-Budget recommendations for 2027-28.

 

The industry body has also called for the continuation of the existing customs duty framework on steel scrap beyond March 2028, arguing that competitive access to critical industrial inputs is essential to lowering manufacturing costs and improving India’s global competitiveness.

 

The recommendations were submitted during a pre-Budget meeting with officials of the Tax Research Unit under the Department of Revenue, Ministry of Finance, on Tuesday.

  

“Strengthening India’s manufacturing competitiveness requires a comprehensive approach to reducing the cost of critical industrial inputs. Energy and feedstock costs have a cascading impact across multiple sectors, influencing production economics, investment decisions and the competitiveness of downstream industries,” said Anil Gupta, president, PHDCCI.

 

Among the key proposals is the removal of the existing 2.5 per cent BCD on LNG. With India meeting around half of its LNG consumption through imports, the chamber said eliminating the duty could improve the affordability of natural gas for energy-intensive industries.

 

LNG is used in fertiliser production, power generation, city gas distribution, steel manufacturing, refineries and petrochemicals. Lower import costs could also support its wider use in industrial applications and transportation.

 

The chamber has also sought a zero-duty regime for heavy petroleum feedstocks, including fuel oil, vacuum residue, slurry and vacuum gas oil (VGO), when imported for refinery processing.

 

According to PHDCCI, access to alternative heavy feedstocks would provide greater operational flexibility to domestic refiners, particularly amid sourcing challenges associated with heavy crude oil due to geopolitical uncertainties. These materials also have applications in power, textiles, fertilisers, shipping, cement, tyre and rubber manufacturing, petrochemicals and road infrastructure.

 

On naphtha, another key petrochemical feedstock, the chamber has recommended removing the 2.5 per cent BCD. Naphtha is used to manufacture olefins, aromatics and other petrochemical intermediates that serve as inputs for plastics, packaging, automotive components, synthetic materials and chemicals. It is also used in the production of urea and other chemical products.

 

Data from the Department of Chemicals and Petrochemicals shows that naphtha consumption in the petrochemical sector increased from 11.339 million tonnes in 2020-21 to 11.457 million tonnes in 2024-25.

 

For the aluminium industry, PHDCCI has proposed reducing BCD on calcined petroleum coke (CPC), used in anode manufacturing, from 7.5 per cent to 2.5 per cent. The duty on raw petroleum coke (RPC) should also be reduced from 10 per cent to 2.5 per cent, it said.

 

CPC and RPC are essential inputs in the manufacture of carbon anodes used in aluminium smelting and together account for around 10-15 per cent of the relevant input cost basket in aluminium production. The chamber said existing import duties, along with quantitative restrictions, add to the cost burden on domestic manufacturers.

 

The industry body has further sought the continuation of the existing BCD framework on steel scrap beyond March 2028. Scrap is an important raw material for electric arc furnace- and induction furnace-based steelmaking, helping supplement domestic availability and support secondary steel production.

 

A predictable duty framework would help ensure access to the raw material for steelmakers and support downstream sectors such as construction, infrastructure, automobiles, engineering and capital goods, the chamber said.

 

“An attuned customs duty framework focused on essential industrial inputs can generate benefits beyond individual sectors by improving cost competitiveness across interconnected manufacturing value chains. Such measures can also support investment in domestic processing capacities and strengthen supply-chain resilience,” said Ranjeet Mehta, secretary general and chief executive officer, PHDCCI.