Government Reduces Import Duties Amid Global Supply Chain Disruptions

Impact of Middle East Conflicts on Oil Prices

The ongoing conflicts in the Middle East have significantly disrupted global supply chains for crude oil and LPG. With shipping routes in the Strait of Hormuz being blocked, crude oil prices have surged to a record high of $122 per barrel. This disruption has led to a persistent shortage of petrol and LPG in several countries.

Government Measures to Alleviate Burden on Citizens

In response to rising costs, private companies have increased fuel prices. To mitigate the impact on the public, the government has reduced excise duties on petrol and diesel by ₹10 per liter. Additionally, the government has lowered import duties on petrochemical products to provide relief to consumers.

Details of the Duty Exemptions

According to a notification from the Finance Ministry, customs duties on 41 essential petrochemical items have been completely waived. This exemption, effective from April 2, 2026, will remain in place until June 30, 2026. The aim of this initiative is to ensure that domestic industries have easy access to necessary raw materials.

Benefits for Various Manufacturing Sectors

This decision is expected to benefit sectors such as plastics, packaging, textiles, pharmaceuticals, chemicals, and automotive parts. The government's actions are designed to alleviate the rising costs of essential goods for everyday consumers.

Global Supply Chain Effects

The Finance Ministry has stated that the ongoing conflict in West Asia has severely impacted global supply chains. Consequently, the government has decided to eliminate customs duties on essential petrochemical inputs. Let’s explore which items have had their customs duties removed.

List of Duty-Free Items

The government has exempted customs duties on 40 items, including methanol, toluene, styrene, vinyl chloride monomer, monoethylene glycol (MEG), phenol, acetic acid, purified terephthalic acid (PTA), polyethylene, polypropylene, polystyrene, polyvinyl chloride (PVC), polyethylene terephthalate (PET), and engineering plastics such as acrylonitrile-butadiene-styrene (ABS) and polycarbonate. These products can be imported without customs duties until June 30.

Applications of Key Chemicals

Methanol is used in the production of plywood, insulation foam, acetic acid, plastics, synthetic fibers, paints, coatings, and pharmaceuticals. Toluene is utilized for making paints, thinners, adhesives, printing inks, paint removers, rubber, resins, and plastics. Polystyrene is used for disposable plates, cups, food containers, egg trays, and ice cream cups. Vinyl chloride monomer is essential for manufacturing blood bags, medical tubing, toys, and credit cards. Monoethylene glycol is used in water bottles, soft drink bottles, and shampoo/oil containers. Polyethylene is used for milk/juice bottles, water pipes, shopping bags, food wraps, sandwich bags, and disposable gloves.

Reasons Behind the Government's Decision

The ongoing conflict in West Asia has affected shipping routes, raising concerns about the import of fertilizers, crude oil, and natural gas. India relies on imports for 85% of these essential goods. Following an attack on Iran by the US and Israel on February 28, 2026, tensions escalated, causing crude oil prices to rise by over 50%. The disruption in shipping has led to increased shipping costs.

Export Duties Imposed on Diesel and ATF

Last week, the government announced a ₹10 per liter reduction in excise duties on petrol and diesel. Additionally, export duties of ₹21.50 per liter on diesel and ₹29.50 per liter on aviation turbine fuel (ATF) have been implemented. Currently, there is an excise duty of ₹3 per liter on petrol, while diesel has no excise duty. This relief is expected to provide immediate support to the petrochemical industry and help control manufacturing costs.