Archive · 1 Oct 2026
Energy Shock Raises Deficits and Permanent Government Costs
Global oil has become more expensive, but domestic fuel prices are being kept steady.
This means oil companies may receive less money than they need for every litre sold.
The government may have to cover the difference.
The expected loss is INR8 per litre for petrol and INR9 per litre for diesel.
The oil companies have already received INR1.23 trillion during the first 78 days of the crisis.
More expensive oil also means more money must be spent on imports.
This is expected to increase the current account deficit.
The deficit is forecast to rise from 0.6% to 1.5% of GDP.
In simple terms, the energy shock could create costs that last beyond the immediate crisis.
The current account deficit is projected to reach 1.5% of GDP in FY2026–27, up from 0.6% in FY2025–26.
Global crude-price increases are contributing to the expected widening of the current account deficit.
The government is likely to absorb under-recoveries of INR8 per litre on petrol and INR9 per litre on diesel.
Oil marketing companies reported these under-recoveries while domestic fuel prices were maintained.
Oil marketing companies received INR1.23 trillion to maintain prices during the first 78 days of the ongoing crisis.
- Who
- The government and oil marketing companies are involved.
- What
- Global crude-price increases are expected to widen the current account deficit and create fuel under-recoveries.
- When
- The projections concern FY2026–27 and FY2025–26; the INR1.23 trillion support covered the first 78 days of the ongoing crisis.
- Why
- Crude prices have increased globally while domestic petrol and diesel prices are being maintained.
- Projected CAD, FY2026–27
- 1.5% of GDP
- CAD, FY2025–26
- 0.6% of GDP
- Petrol under-recovery
- INR8 per litre
- Diesel under-recovery
- INR9 per litre
- Support already provided
- INR1.23 trillion
- Support period
- First 78 days of the ongoing crisis