Government Forgoes ₹1.23 Lakh Crore Revenue to Back OMCs Amid Petrol, Diesel Duty Cuts

The Centre has forgone nearly ₹1.23 lakh crore in revenue after reducing excise duty on petrol and diesel, providing support to state-run Oil Marketing Companies (OMCs) during a period of elevated global crude prices, as per news reports.  

The revenue loss covered a 78-day period when retail fuel prices remained largely insulated despite higher import costs linked to the West Asia conflict. 

Fuel Price Hikes Reduce Under-Recoveries 

Petrol and diesel prices were revised four times on May 15, 19, 23 and 25. In Delhi, petrol prices increased from ₹94.77 per litre to ₹102.12, while diesel rose from ₹87.67 to ₹95.20 per litre.  

Before these revisions, OMCs were estimated to be losing around ₹1,000 crore a day. Following the price increases, daily under-recoveries fell to below ₹600 crore by May 2026. 

Global Disruptions Add Pressure 

The rise in crude prices followed supply disruptions caused by the conflict in West Asia and the blockade of the Strait of Hormuz, a key global shipping route for oil and LNG.  

India, which imports a large share of its crude oil requirement, remains exposed to international price movements and exchange rate fluctuations.  

Officials, however, said energy imports and LPG supplies have continued without disruption. 

Subsidy Burden Extends Beyond Fuel 

Alongside fuel support, the government is also facing higher fertiliser subsidy requirements.  

The Ministry of Chemicals and Fertilisers has sought around ₹3.4 lakh crore, compared with the Budget estimate of ₹1.71 lakh crore.  

Higher global prices of fertilisers and raw materials have increased the subsidy burden as urea continues to be sold at controlled prices to farmers. 

Read More: India's Defence Spending Reaches $92.1 Billion in 2025: SIPRI Report! 

Conclusion 

The excise duty reduction has shifted part of the cost of higher crude prices to the government's finances instead of consumers. At the same time, rising expenditure on fuel and fertiliser support is adding to fiscal commitments amid continued volatility in global commodity markets. 

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