The government has raised the import duty on propane, specifically for commercial purposes. The new import duty rate of 19.25% marks a significant increase compared to the previous rate of 2.75%.
As a result of this development, there is an anticipation of a price surge of approximately Rs 5-6 per standard cubic meter (scm) for propane in the Morbi region. Consequently, this price increase will nullify the cost advantage that propane previously enjoyed over Gujarat Gas. Propane is the most cost effective fuel for ceramic cluster of Morbi.
This decision to raise import duty stems from the ongoing decline in international propane prices and the potential request from City Gas Distribution companies to address the existing disparity in taxation between natural gas and propane. It's important to note that natural gas falls under the VAT regime, and many buyers are unable to claim input tax credit. On the other hand, propane and butane fall under the GST regime, according to Antique Stock Broking.
Before the implementation of the import duty, propane was priced at approximately Rs 32-33/scm, while Gujarat Gas was priced at Rs 38.6/scm.
For the month of August 2023, propane prices are expected to decrease to $400 per tonne, in contrast to $450/tonne in July. Propane serves as the primary competitor to Gujarat Gas in the Morbi region.
