PHDCCI urges customs duty waiver on LNG, naphtha in Budget 2027-28 wish list
Synopsis
Industry body PHDCCI is pushing the Centre to scrap the 2.5% import duty on LNG and naphtha and introduce a zero-duty window on heavy petroleum feedstocks ahead of Budget 2027-28 — a move it says would cut costs across power, fertilisers, petrochemicals, and aluminium, and sharpen India's manufacturing edge at a time of persistent geopolitical supply disruptions.
Key Takeaways
PHDCCI submitted pre-Budget recommendations to the Tax Research Unit, Ministry of Finance on 10 November 2026 .
The chamber seeks removal of the 2.5% BCD on LNG ; India imports roughly half its LNG requirements.
A zero-duty regime on heavy petroleum feedstocks — fuel oil, vacuum residue, slurry, VGO — is sought for refinery processing imports.
Removal of the 2.5% BCD on naphtha has been recommended, citing downstream uses in plastics, chemicals, and urea.
The chamber also wants lower tariffs on petroleum coke for aluminium manufacturing and extension of the steel scrap duty framework beyond March 2028 .
PHDCCI President Anil Gupta cited cascading cost impacts on production economics and investment decisions across sectors.
The PHD Chamber of Commerce and Industry (PHDCCI) has formally requested the removal of basic customs duty (BCD) on liquefied natural gas (LNG), naphtha, and select heavy petroleum feedstocks, while also seeking lower tariffs on petroleum coke used in aluminium manufacturing, as part of its pre-Budget recommendations for the Union Budget 2027-28. The industry body submitted these proposals during a meeting with officials of the Tax Research Unit under the Department of Revenue, Ministry of Finance, on Tuesday, 10 November 2026.
Key Demands at a Glance
Among the most significant proposals is the scrapping of the existing 2.5% BCD on LNG. With India importing roughly half of its LNG consumption, PHDCCI argues that eliminating the levy would directly reduce energy costs for industries such as power, fertilisers, textiles, and petrochemicals. The chamber has also called for a zero-duty regime on heavy petroleum feedstocks — including fuel oil, vacuum residue, slurry, and vacuum gas oil (VGO) — when these are imported specifically for refinery processing.
The Case for Naphtha and Petroleum Coke Relief
On naphtha, a critical petrochemical feedstock used to manufacture olefins, aromatics, and other intermediates, PHDCCI has recommended removing the existing 2.5% BCD. Downstream applications span plastics, packaging, automotive components, synthetic materials, chemicals, and urea production. Separately, the chamber has pushed for reduced import tariffs on petroleum coke used in aluminium manufacturing, where energy-intensive smelting processes make feedstock costs a major variable.
What the Industry Body Said
PHDCCI President Anil Gupta made the case for a systemic approach, stating: '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.'
Steel Scrap Duty and Geopolitical Context
Beyond energy inputs, PHDCCI has also called for the continuation of the existing customs duty framework on steel scrap beyond March 2028, arguing that predictable access to recycled inputs is essential to keeping domestic steel production costs competitive. The chamber flagged that geopolitical disruptions have already complicated sourcing of heavy crude oil, making access to alternative feedstocks — such as VGO and vacuum residue — a matter of industrial resilience, not just cost optimisation. These materials feed into power, textiles, fertilisers, shipping, cement, tyre and rubber manufacturing, petrochemicals, and road infrastructure.
Why This Matters for Indian Industry
India's manufacturing sector has long flagged high input costs as a structural drag on global competitiveness. Duty-related cost escalation on energy and feedstocks ripples through supply chains, affecting everything from plastic packaging to urea prices. This comes amid the government's broader push to expand manufacturing's share of GDP — currently hovering near 17% against a longstanding 25% target. If the Centre accepts even a subset of PHDCCI's proposals, the relief could meaningfully reduce production costs across several energy-intensive sectors. The Budget is expected to be presented in February 2027.
Point of View
Power, and textile costs are real. But pre-Budget submissions from industry bodies routinely exceed what the finance ministry delivers, and duty cuts on petroleum products carry fiscal and revenue trade-offs the Centre must weigh against subsidy commitments and the FRBM path. The more interesting signal here is the steel scrap duty extension request: it acknowledges that India's scrap-recycling ecosystem still needs protection, which raises questions about how far the domestic circular economy has actually matured. The government's response to even a partial acceptance of these proposals will be a litmus test for whether Budget 2027-28 prioritises manufacturing input-cost reform or opts for headline capital-expenditure numbers instead.
NationPress
11 Nov 2026
Frequently Asked Questions
What has PHDCCI demanded ahead of Union Budget 2027-28?
PHDCCI has sought the removal of the 2.5% basic customs duty on LNG and naphtha, a zero-duty regime on heavy petroleum feedstocks for refinery processing, lower tariffs on petroleum coke used in aluminium manufacturing, and continuation of the existing steel scrap duty framework beyond March 2028. The recommendations were submitted to the Tax Research Unit under the Ministry of Finance on 10 November 2026.
Why does PHDCCI want the customs duty on LNG removed?
India imports roughly half its LNG consumption, and the existing 2.5% BCD adds to the cost of natural gas for energy-intensive industries including power, fertilisers, textiles, and petrochemicals. PHDCCI argues that eliminating the duty would improve affordability and lower production costs across these sectors.
How does naphtha customs duty affect Indian manufacturing?
Naphtha is a key feedstock for producing olefins, aromatics, plastics, packaging, automotive components, synthetic materials, chemicals, and urea. A 2.5% BCD on imports raises input costs across all these downstream industries, and PHDCCI's recommendation to remove it aims to make Indian petrochemical producers more cost-competitive globally.
Why is PHDCCI asking for the steel scrap duty framework to continue?
The chamber argues that competitive and predictable access to steel scrap — a key input for electric arc furnace-based steelmaking — is essential for keeping domestic steel production costs in check. Extending the existing duty framework beyond March 2028 would provide industry the policy certainty needed for investment planning.
What is the broader significance of these recommendations?
The proposals collectively address a structural concern: high energy and feedstock import costs that cascade into prices across manufacturing, infrastructure, and agriculture. If the Centre accepts even a portion of these suggestions in Budget 2027-28, it could meaningfully reduce input costs at a time when India is trying to raise manufacturing's share of GDP toward its 25% target.
