India Prepares for Fuel Price Volatility Amid Middle East Tensions

The Indian government has announced that it will continue to implement measures to control fuel prices amid rising tensions in the Middle East. The conflict has led to a surge in oil and gas prices, prompting the government to take action.

Earlier this year, the government reduced the special additional excise duty on petrol and diesel by Rs 10 per litre, resulting in a revenue loss of around Rs 1.23 lakh crore for the financial year 2026-27. This reduction helped offset the under-recoveries being absorbed by public-sector oil marketing companies (OMCs), enabling them to continue supplying fuel without disruption.

Minister of State for Finance Pankaj Chaudhary stated that the government will continue to adopt appropriate fiscal and administrative measures to mitigate the impact of future fuel price volatility while maintaining fiscal sustainability. The government's strategy is to accommodate such measures within the available budgetary space by closely monitoring revenue and expenditure trends, reprioritising expenditure, and taking appropriate fiscal measures as warranted by evolving economic conditions.

The government aims to strengthen domestic revenue mobilisation, enhance energy security through diversification of crude oil import sources and expansion of strategic petroleum reserves, promote alternative and cleaner fuels, and improve energy efficiency. This will reduce the economy's vulnerability to external energy shocks while supporting sustainable and resilient economic growth.