Quieter, pointed reforms for ports, customs tariffs with big trade payoffs in Budget 2027
Customs duty reforms in Budget FY27 will target lower turnaround times for cargo ships and streamline tariffs with an intent to support export diversification in an era of uncertain global trade. In the Union budget, the government wants to enhance trade efficiency by aligning with global practices.
Upcoming customs duty reforms will attempt to help cargo ships turn around faster at Indian ports and further streamline the core tariff rate structure, two persons familiar with the development said, making cross-border trade simpler, quicker and cheaper.
The FY27 Union budget's overall customs strategy will also support businesses diversifying their export markets to limit the impact of global trade uncertainties feeding into domestic manufacturing, they said.
Hectic pre-budget discussions are on in the government about simplifying customs procedures, increasing last-mile connectivity to ports, and automating more processes so that consignments can leave ports faster. This is a major area of customs reform expected in the Union budget, the first the two persons cited above said.
Currently, the average turnaround time for a ship at an Indian port is 48 hours, against less than half a day at top trading hubs like Hong Kong. The idea in the Indian government is to narrow this gap as much as possible, the person cited above said. Ships idling at ports raises costs for shipping lines, which translates into shipment delays and higher transport costs.
Finance minister Nirmala Sitharaman had said at the HT Leadership Summit 2025 earlier this month that reforming India’s customs duty regime by lowering rates on selected goods, increasing transparency, and reducing officials’ discretion will be the next major economic reform push.
As per official data, India has significantly improved its average turnaround time for vessels from about 93 hours in 2013-14 to about two days in 2023-24 with Jawaharlal Nehru Port in Nhava Sheva, Navi Mumbai leading the pack with 26 hours.
The improvement in Jawaharlal Nehru Port's performance in post-covid years was noted in a World Bank report in September on container port performance. "The port’s CPPI values were 66 (2020), 62 (2021), 35 (2022), 48 (2023), and 100 (2024). This upward trend reflects the addition of terminal capacity and process reforms that have reduced turnaround and dwell times," noted the report, put together with S&P Global Market Intelligence.
CPPI, short for container port performance index, measures time performance compared to the global average with zero set at the average. The Navi Mumbai port was ranked 10th among global ports by pace of improvement in performance between 2020 and 2024.
Tariff card
The government is also exploring the possibility of reducing the number of core tariff rates further down from eight now, to the extent possible, after two rounds of reduction in the February 2023 and February 2025 budgets meant to phase out 14 tariff rates.
India now has eight core tariff rates: zero, 5%, 10%, 15%, 20%, 30%, 50% and 70%, barring outliers such as wine and alcohol that are levied higher duties. Free trade deals offer concessions on these rates.
Calibration of customs duty rates on specified goods are also being examined to align the rates with India’s industrial goals of keeping imported raw material and machinery costs low and for providing sufficient tariff protection for domestic production of intermediate-to-final goods as the country seeks to achieve backward integration in manufacturing.
However, trade strategy will play a key role in the customs reform drive. One of the options on the table is to further lower the number of tariffs rates to converge with developed country practices of having a limited number of rates or rate bands, but that will be worked out in conjunction with India’s trade diversification strategy. Upfront, across-the-board concessions on customs duty structure could make India’s offers to potential trade partners less appealing, said the second person.
Queries emailed to the finance ministry and to Central Board of Indirect Taxes and Customs, or CBIC, on Tuesday seeking comments remained unanswered at the time of publishing.
Experts said that customs duty structure simplification is a key expectation from the Union budget for FY27. “Over time, multiple tariff rates and frequent changes have increased complexity, compliance costs, and disputes. The Budget provides an opportunity to bring greater predictability and to align customs policy with long-term trade and manufacturing objectives, said Rajat Mohan, senior partner at chartered accountancy firm AMRG & Associates.
“There is a strong case to reduce the number of customs tariff rates," said Mohan, adding that reforming the customs duty structure following the GST 2.0 approach could meaningfully improve ease of doing business. By GST 2.0, he was referring to the reset of goods and services tax rates that came into effect 22 September.
Fewer tariff bands can reduce classification disputes and limit administrative discretion, said Mohan. “A calibrated move towards three to four principal tariff rates, along with a gradual pruning of exemptions, would help balance revenue considerations with trade facilitation and strengthen India’s position as a predictable and globally aligned trade regime."
The government has a few goals in mind for tweaking the customs duty structure and procedures. This year’s objectives include:
- Faster trade diversification
- Greater access to critical minerals for domestic industry at reduced cost
- Adjusting the import duty on intermediate products where domestic capacity is developing and hence needs tariff protection
- Supporting measures for labour intensive sectors like textiles, leather goods and handicrafts, and
- Greater leeway for businesses to meet export conditions tied to duty free raw material imports.
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