India to review tariff surcharges on luxury cars, solar panels
India will review tariffs on more than 30 items, including luxury cars, solar panels and chemicals, a senior finance ministry official said, that could lead to increased imports from the United States as global trade tensions escalate. The step, which would bring average tariffs down, comes ahead of Prime Minister Narendra Modi's visit to the United States next week.
In an effort not to get caught in the expanding tariff actions of President Donald Trump, India has already reduced average rates of import tariffs to 11% from 13% for some items in the recently announced budget.
The finance ministry official refused to comment on the time taken to complete the consultation process, but industry experts say the process would take months.
Indian government ministries, including those that control heavy industries and renewable energy, will soon consult the domestic industry for reducing the Agriculture Infrastructure Development Cess (AIDC), Sanjay Agarwal, chairman of the Central Board of Indirect Taxes and Customs, said in an interview with Reuters on Tuesday.
The AIDC is an import substitute tariff, imposed by the Indian federal government for collection of money in an independent pool, and the money collected is utilized for the creation of farm infrastructure.
The ministries would select items from this list for opportunities for tariff reduction after consulting the industry, Agarwal said. India has shielded domestic industries like autos, drugs, pharma, and farm businesses through state support and high tariff imports even as there was pressure mounting to improve ties with the Trump administration.
The list includes 32 items, which range from luxury cars, solar panels, yachts, sports boats, equipment used in the manufacture of semiconductors, and other equipment, all of which have seen the government imposing AIDC tariffs ranging from 6.5% to 70% on imports, after slashing basic customs duties.
India's aggregate imports, including AIDC, face much higher tariffs than major trading partners such as the United States, China, and Japan, a senior official said.
"We can't take a giant step. We have to take baby steps," Agarwal said, referring to India's strategy of taking baby steps in reducing tariffs to temporarily protect domestic industry and make their products more competitive.
Commenting on Trump's complaint of a high U.S. trade deficit by India, Agarwal said average tariffs on goods imported from the United States are fairly low, and imports, especially of crude oil and liquefied natural gas, could increase this year.
"Duty is not an issue in the oil sector. One Indian rupee per metric ton is the rate of duty on import of crude," he said, suggesting that U.S. crude could become price competitive for India as supplies from Russia are facing higher sanctions.
India's trade surplus with the U.S., estimated at $35 billion in 2023/24, has been a hotly contested issue after Trump's earlier threat to impose tariffs against India's high duties.
India's imports of U.S. crude oil and LNG, estimated at $6.5 billion in the 2023/24 fiscal year through March, out of a total of $42 billion in imports, could increase after the U.S. sanctions on.
Russia's oil companies and China's retaliatory tariffs on energy imports from the U.S., analysts said, "We got more favorable prices from Russia. But the situation can change," Agarwal added that the trade imbalance could be "rectified."
India's top 30 imports from the US- oil products, diamonds, all fall in the low tariff band, he said, identifying areas where imports can potentially increase from 3% on aircraft to 7.5% on petrochemicals.
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