Will India have to pay a 20% fee for its ships passing through Hormuz?

US President Donald Trump says he wants a reimbursement from countries for protecting the Strait of Hormuz, the crucial passageway for energy and essential cargoes. “The USA will be, from this point forward, known as ‘THE GUARDIAN OF THE HORMUZ STRAIT,’ but as such, and as a matter of FAIRNESS, will be reimbursed, at the rate of 20% on all cargo shipped, for any and all costs necessary to do the job of providing safety and security to this very volatile section of the World. The process and formation will begin immediately,” Trump wrote. 

Before that he said that the US was going to keep the strait and run it. He said the US would become the guardian of the strait, and that they should be reimbursed for that. 

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This adds to India’s growing woes and uncertainties regarding imports. A free and secure Hormuz is of utmost importance to India as almost 40 per cent of India’s crude imports, 60 per cent of its LNG shipments and 90 per cent of LPG inflows pass through Hormuz. 

HOW WILL THIS IMPACT INDIA?

A proposed 20% cargo fee on ships transiting the Strait of Hormuz could significantly increase India’s energy import costs, adding to pressure on refiners, shipping companies and insurers at a time when traffic through the strategic waterway is already under strain.

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Any prolonged rise in freight and insurance costs, along with a transit surcharge, could add fresh pressure to the fuel import bill and complicate efforts to contain inflation. Although Hormuz remained open throughout the hostilities, war-risk insurance premiums rose sharply, freight rates increased and shipping companies imposed additional security-related charges on vessels operating in the Gulf.

These higher transportation costs pushed up the landed price of crude for Indian refiners. At the same time, fears of a potential blockade drove global benchmark Brent crude prices higher, raising concerns over imported inflation and a larger oil import bill.

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If implemented, the 20% transit surcharge would further raise the landed cost of crude imports for Indian refiners. 

According to Bloomberg, only six ships passed through Hormuz on Sunday. And meanwhile, nine Indian ships were stranded at the strait last week.