Govt has adequate resources to handle spike in petroleum, fertiliser subsidy bills: FM Sitharaman
Mumbai, July 26
Finance Minister Nirmala Sitharaman said on Sunday that while the Middle East conflict has led to an increase in the country's petroleum and fertiliser subsidy bill due to the spike in global prices, the government has an adequate resource buffer to manage the situation without any changes in the Budget estimates for 2026-27.
Speaking at the NDTV Profit Business Leadership Awards function here, the Finance Minister said, "I have kept buffers which can take care of it and therefore at this stage, I don't think I'll look at my budget number for readjusting," as she referred to the government support for oil and fertiliser imports at higher prices.
The government has "some resources kept aside" to meet challenges arising from rising risk insurance premia as ships pass through war zones, she added.
The Finance Minister further stated that the deficient monsoon rains due to the El Nino effect were adding to existing inflation risks.
"Inflation therefore cannot be just imported. It is also our own want of rain and the monsoon being less-than-normal that could also add to price pressures," she said.
Sitharaman highlighted that several indicators, including goods and services tax collections, pointed to resilient economic growth in the country. The Reserve Bank of India (RBI) has also projected a robust 6.6 per cent growth rate for the economy during 2026-27 despite the supply chain disruptions due to the Iran war and the adverse impact expected on the country's agriculture sector due to the deficient monsoon.
India's fiscal burden is growing as the fertiliser subsidy bill faces a massive surge alongside major financial support extended to petroleum and fuel retailers due to ongoing geopolitical shocks in West Asia.
The original FY27 budget allocation for fertiliser subsidies was set at approximately Rs 1.71 lakh crore. Surging global import prices for urea, DAP, and vital raw materials like natural gas have pushed the projected requirements much higher.
State-run oil marketing companies -Indian Oil, BPCL and HPCL have received nearly Rs 1.23 lakh crore in financial assistance to absorb shocks and freeze retail fuel prices for extended periods in order to protect consumers from skyrocketing global prices. The LPG subsidy component alone is projected to comfortably cross Rs 1 lakh crore against modest initial budget assumptions as global energy markets remain volatile.
— IANS
Reader Comments
Finally some clarity from the FM. The LPG subsidy crossing Rs 1 lakh crore is shocking though - shows how volatile global markets are. Farmers must be worried about DAP and urea prices too. At least the government is trying to shield consumers, but inflation is still a big concern. Monsoon deficiency + Middle East war = perfect storm for prices.
As an expat living in India, I find it fascinating how the government manages these fiscal buffers. Back in the UK, we'd have seen an emergency budget by now. The 6.6% growth projection despite all this is remarkably optimistic. Hope the monsoon doesn't disappoint further - already seen shortages in some vegetables near me.
Respect to FM for being transparent about the challenges. But why did we not plan for this earlier? The Middle East situation has been brewing for months. Rs 1.23 lakh crore to OMCs is huge money that could have been used for infrastructure or healthcare. Hope the buffers are real and not just accounting tricks. 🤔
GST collections are strong, GDP growth is robust - that's the silver lining. As someone running a small business in Delhi, I've seen demand hold up pretty well. But the fertiliser subsidy thing is worrying for our farmer friends. If global gas prices stay high, urea costs will eat into everyone's margins. Still, better to have a government that's prepared than one that panic-spends.
The FM's confidence is reassuring, but I'm skeptical about the "buffers" narrative. Remember when we kept hearing about fiscal prudence and then had to do
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