India exempts import tax on VLSFO to cope with IMO 2020

Reuters reported that the tax exemption is stated in India’s federal budget documents for 2020/21.

Since 1 January 2020 under IMO Marpol Annex VI regulation, all ocean-going ships are required to burn fuels with a maximum sulphur content of 0.5%, down from the previous 3.5% limit, necessitating the use of VLSFO if the ship is not equipped with an exhaust gas cleaning system.

The 0.5% low sulphur fuel, however, is not available at all Indian ports, making it necessary for India to import the product, Reuters reported.

Some local refiners including Indian Oil Corp and Hindustan Petroleum Corp have started making VLSFO to meet demand.

“There is a shortage of fuel for coastal movement of vessels,” Rahul Bhargava, executive director of Essar Shipping, was quoted saying. He added that the tax cut would help cope with demand.

The tax cut is expected to mainly help Indian shipping companies cope with IMO 2020 compliance as foreign vessels typically carry out their bunkering at other key ports such as Singapore and Fujairah.