Centre spent Rs 1.23 lakh cr to shield consumers from fuel price hike for 78 days

The government extended financial support of approximately Rs 1.23 lakh crore to oil marketing companies (OMCs) to cushion under-recoveries caused by the West Asia conflict and shield consumers from rising crude oil prices for 78 days.

Government sources said the measure was aimed at ensuring that state-owned fuel retailers did not immediately transfer higher global oil costs to consumers.

The Finance Ministry had advised OMCs to delay the pass-through of higher oil prices for 78 days. Beyond that period, however, extending support would have become difficult given the rising costs of fertilisers and crude oil, the sources said.

According to the sources, the government’s support amounted to Rs 1.23 lakh crore, including excise duty revenue foregone during the period. “OMCs received support from the government to the tune of Rs 1.23 lakh crore. More funding is not feasible. OMCs are increasingly making their own pass-through decisions,” the sources added.

The gap between domestic retail fuel prices and global crude prices continues to put pressure on fuel retailers, leading to significant under-recoveries — losses incurred when retail prices do not fully cover the costs of procurement, refining, transportation and marketing.

According to the sources, the OMCs are currently under-recovering more than Rs 650 crore per day. The government said its support package included both direct fiscal assistance and revenue foregone through lower excise duty collections.

Meanwhile, the sources said the government did not immediately need to undertake additional borrowing or seek fresh grants in the upcoming monsoon session of Parliament, as the FY27 Budget had factored in uncertainties arising from global tariff-related developments.

On the fiscal deficit, the sources maintained that the government remained committed to the budgeted target of 4.3 per cent of GDP and was actively leveraging non-tax revenue streams such as asset monetisation and disinvestment during the current fiscal year.

“Both DIPAM and DPE are working with a medium-term as well as annual roadmap for asset monetisation and disinvestment. We hope the budgeted target of Rs 80,000 crore under this head will be exceeded. The disinvestment process in IDBI Bank will continue,” sources said.