NEW DELHI, Sept 17 (Reuters) - ArcelorMittal's India joint venture has called on New Delhi to remove the import tax on liquefied natural gas (LNG) for steelmaking to help the company cut its production costs and meet decarbonisation goals, a letter seen by Reuters showed.

Steel production accounts for about 8% of global carbon emissions. Replacing coal as a fuel source with LNG can remove some of them, but increases production costs.

"To meet both domestic and international steel demands, we propose implementing a nil rate of duty on LNG imports for steel manufacturing," ArcelorMittal Nippon Steel India (AM/NS India) said in a letter dated Sept. 2 to the federal finance ministry.

India, the world's second biggest crude steel producer, levies a 2.5% basic customs duty and an additional 0.25% social welfare tax on LNG.

If the government concedes to AM/NS India's requests, other steelmakers such as JSW Steel (JSTL.NS) , opens new tab and Tata Steel (TISC.NS) , opens new tab would also benefit.

The federal finance ministry and AM/NS India did not reply to Reuters' emails requesting comment.

In a report released this month, the ministry of steel noted that natural gas was "significantly expensive".

India's steel industry accounts for 10%-12% of its total emissions, with 2.54 metric tons of carbon dioxide generated for every ton of steel. This exceeds the global average of 1.91 metric tons for every ton of crude steel.

India, the world's third biggest emitter of greenhouse gases, has pledged to achieve a net zero carbon emission target by 2070. New Delhi also aims to raise the share of natural gas in its energy mix to 15% by 2030 from around 6% now.

AM/NS India also urged the government to include natural gas in the Goods and Services Tax (GST) regime to make prices cheaper and more uniform across the country.

"This situation (LNG being out of the purview of GST) potentially drives end users to prefer imported products over costlier domestically sourced goods, thereby undermining the 'Make in India'," it said, referring to India's ambitions plans to make it a global manufacturing hub.

By introducing GST, India replaced about 20 federal and state taxes to unify India's around $3.2 trillion economy.

The GST Council, comprising state finance ministers and chaired by the federal finance minister, needs to approve and set tax rates for LNG.

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https://www.reuters.com/business/energy/arcelormittals-india-jv-seeks-duty-free-lng-imports-letter-shows-2024-09-17/