The Centre has extended fiscal support of around Rs 1.23 lakh crore to oil marketing companies (OMCs) by allowing them to retain gains from the excise duty cut on petrol and diesel and absorb the impact of elevated crude oil prices for 78 days, senior government sources said on Tuesday.
However, officials indicated that no further fiscal support is likely, and future increases in input costs may have to be passed on to consumers through fuel price revisions.
Amid the impact of the West Asia crisis on global crude oil prices, the government on 27 March reduced the central excise duty on petrol and diesel by Rs 10 per litre each. While the duty cut lowered government revenues, OMCs did not correspondingly reduce retail fuel prices, enabling them to offset a portion of their losses. The government also earmarked Rs 10,000 crore for OMCs to help stabilise aviation turbine fuel (ATF) prices.
"We provided fiscal support of around Rs 1.23 lakh crore to OMCs by enabling them to absorb the impact of higher crude prices for 78 days. However, the companies continue to face under-recoveries, which they will have to recoup through calibrated price increases," a government source said.
According to officials, OMC under-recoveries remain elevated at around Rs 652 crore per day following the sharp increase in global crude oil and natural gas prices.
The prolonged West Asia conflict has disrupted energy supply chains and pushed up crude prices, resulting in significant pressure on OMC margins. In response, fuel retailers raised petrol and diesel prices in phases four times last month. Petrol prices have increased cumulatively by Rs 7.35 per litre, while diesel prices have risen by Rs 7.53 per litre.
Sources clarified that the Centre has not advised state governments to reduce value-added tax (VAT) or sales tax on petrol and diesel to soften the impact on consumers.
The government has maintained that the domestic economy remains broadly resilient despite global uncertainties. However, officials identified three key areas of concern — fertilisers, gold and crude oil — where price pressures continue to pose risks.
Sources added that the government has limited fiscal space to provide additional support to OMCs, as it may need to allocate greater resources towards fertiliser subsidies in the coming months.