Post by : Rameen Ariff

In a landmark initiative to broaden its energy sources, India has signed a one-year liquefied petroleum gas (LPG) supply agreement with the United States, announced officials on Monday. This deal, which will provide 2.2 million tonnes per year from the US Gulf Coast, is anticipated to account for nearly 10% of India’s annual LPG imports and represents the first organized US LPG contract for the Indian market.

Petroleum and Natural Gas Minister Hardeep Singh Puri highlighted the strategic essence of this agreement, stating it unveils one of the quickest growing and largest LPG markets globally to the US. “In our mission to ensure secure and affordable LPG access for the citizens of India, diversifying our supply sources is paramount,” Puri mentioned, emphasizing India’s goal to lower reliance on any single origin.

This agreement emerges amidst existing trade challenges with the US. Relations between Washington and New Delhi faced turbulence in August, when President Donald Trump levied a 50% tariff on Indian exports, citing concerns about India’s indirect support for Russia's actions in Ukraine through discounted oil purchases. Notwithstanding these issues, negotiations are ongoing across various sectors, including agricultural trade and energy exports.

India's efforts to diversify energy sources coincide with broader policy shifts. In October, HPCL-Mittal Energy, a state-supported refiner, ceased importing Russian crude in response to US sanctions, while Reliance Industries is assessing the impact of restrictions from both the US and the EU.

The LPG contract also aligns with positive economic signals for India. The nation, now the fifth-largest globally by nominal GDP, experienced its swiftest growth in five quarters during the three months leading up to June 30, fueled by heightened government expenditure and increased consumer confidence. Nevertheless, economists warn that US tariffs could potentially trim 60 to 80 basis points off GDP growth if no relief is forthcoming.

Industry experts suggest that the agreement for US LPG not only represents a strategic achievement but also an economic one for India. It assures a reliable supply for the burgeoning domestic market, alleviates risks related to geopolitical conflicts, and bolsters India's negotiating capacity within global energy discussions.

As India maneuvers through a challenging milieu of trade disputes, sanctions, and an invigorated economy, this LPG agreement stands as a testament to a sensible strategy for energy security and global collaboration. With ongoing discussions between New Delhi and Washington, observers are keenly watching how this agreement influences trade relationships and energy dynamics in the year ahead.

#Global