Govt forgoes Rs 1.23 lakh crore to support oil firms after petrol, diesel duty cuts: Sources
Sources say this measure was meant to stop state-owned fuel suppliers from passing on higher global oil costs to customers
The Finance Ministry provided oil marketing firms (OMCs) with Rs 1.23 lakh crore to avert passing on the impact of higher global crude oil prices to retail customers for 78 days, according to government sources.
They stated that this measure was meant to stop state-owned fuel suppliers from passing on higher global oil costs to customers.
The Finance Ministry suggested that OMCs delay the oil price pass-through by 78 days. Beyond that, however, we believed that it would be too much to support given the rising costs of fertiliser and crude oil, it highlighted.
According to the sources, the government's support amounted to Rs 1.23 lakh crore, including excise duty revenue that was foregone during that time.
"OMCs received support from the government up to Rs 1.23 lakh crore; more funding is not feasible. OMCs are increasingly making their own pass-through decisions," added sources.
The disparity between domestic retail petrol prices and global crude prices continues to put pressure on fuel retailers, leading to significant under-recoveries—losses experienced when retail prices fail to fully cover buying, refining, shipping, and marketing costs.
They are currently under-recovering over Rs 650 crore per day. The government explained that the support includes revenue foregone due to lower excise duty collections in addition to a direct fiscal payout.
Meanwhile, as per the sources, the government does not immediately need to account for more borrowing or submit new grant requests in the upcoming monsoon session of Parliament, as the FY27 Budget took into consideration the uncertainty surrounding tariffs in the global economy.
Moreover, regarding the fiscal deficit, sources stated that the government is actively using its non-tax revenue streams in the current fiscal year, such as asset monetization and disinvestment, and that the budgeted target of 4.3 percent of GDP is still in effect.
In addition to a year-long pipeline, DIPAM and DPE have a medium-term view for asset monetization and disinvestment. Both departments are working on it, and I hope the budgeted Rs 80,000 crore under this subject surpasses the BE. Disinvestment in IDBI Bank will continue, added sources.
