The Fertiliser Ministry has sought a near-100 per cent increase in subsidy support over its budgeted outlay | Photo Credit: MUSTAFAH KK

The government provided nearly ₹1.23 lakh crore in support to state-run oil marketing companies to freeze fuel prices for 78 days following the West Asia crisis, top officials said on Tuesday.

Concurrently, the Fertiliser Ministry has sought a near-100 per cent increase in subsidy support over its budgeted outlay, that amounts to an additional allocation of approximately ₹ 3.4 lakh crore.

Fiscal cushion

The substantial fiscal cushion provided to the energy sector underscores the intensity of the external shocks hitting India’s import bills.

“Oil marketing companies are still incurring ₹650 crore per day loss for selling fuel at lower rate than the prevailing global crude prices,” said a senior official. The financial cushion was necessary even though oil marketing companies raised retail petrol and diesel prices four times since May 15, totalling a hike of ₹7.50-8/ litre. Previously, the government had reduced excise duty on both fuels by ₹10 a litre on March 27.

On the fertilizer front, another official said the Ministry of Chemicals and Fertilisers has sought about ₹3.4 lakh crore of subsidy allocation from the Ministry of Finance which is nearly 100 per cent over and above budget estimate of ₹ 1.71 lakh crore. “It is under consideration of the Finance Ministry,” the official said, adding that global fertilizer supply has ‘narrowed’. “China has also started participating in the supply of fertilizers now. They were not doing so for the past eight months,” the official said.

The breakdown of the agricultural input subsidy details reveals a steep escalation in retail price protection for farmers. According to top government sources, the subsidy on each bag of urea has increased from about ₹2,900 to around ₹4,500 at present, adding pressure to the government’s expenditure commitments.

External challenges

Reviewing the broader macroeconomic landscape, the first official said that while the Indian economy is facing severe external challenges due to the West Asia crisis, domestic consumption remains remarkably strong. However, “growth is not under stress, but there are external challenges from high fertilizer, crude import bill,” the official said while adding that March quarter growth momentum is continuing in the first quarter of FY27, and no adverse impact has been seen on remittances so far.

To balance these escalating expenditure commitments, the Centre is looking at aggressive asset optimisation and capital inflows. Furthermore, the official said that government hopes to exceed budgeted disinvestment, asset monetisation target of ₹80,000 crore in FY27. “Effort for IDBI Bank disinvestment is on,” the official said while adding that more steps to be taken to increase FDI flows into economy. “No proposal to curb capital outflow,” the official said.

Meanwhile, the government’s decision to scrap capital gains tax on foreign portfolio investments in government securities is aimed at helping India’s inclusion in Bloomberg’s Global Aggregate Index, the official said.

Published on June 9, 2026