Import duty on naphtha for use in the power sector will be eliminated in India

10-Dec-08
Import duty on naphtha for use in the power sector will be eliminated in India. Currently, naphtha attracts a Customs duty of 5%. India is self-sufficient in producing naphtha and meets almost all it's requirements of the fuel. Since the country is not self-sufficient in natural gas, power producers often use naphtha for generating electricity. The elimination of import duty will bring down the price of naphtha, since petroleum products are priced on an import-parity basis, which includes components such as freight and import duty. This import duty cut will bring an impact of about US$1.5/mln British thermal units (mmbtu) on the delivered price of naphtha, resulting in an overall 50-55 paise reduction in the cost of power generated from naphtha. The price of naphtha has decreased to about $10 per mmbtu, and though conventionally higher than imported gas, has currently fallen to levels which are lower than gas. This has made naphtha more competitively priced than imported gas.
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