New Delhi: If crude oil prices remain close to USD 100 per barrel, the Central government could face an additional cost of around Rs 30,000 crore for every month the situation continues, according to a report by Elara Securities, ANI reported.
The report said that if Brent Crude stays at about USD 100 per barrel through FY27, the Centre’s extra annual expenditure could reach nearly Rs 3.6 lakh crore.
It also warned that the ongoing conflict in the Middle East shows little sign of easing, raising concerns about an energy crisis in Asia and possible disruptions to global supply chains.
According to the report, if crude remains at this level, India’s current account deficit could widen to about 2 per cent of GDP, compared with around 1 per cent when crude is at USD 70 per barrel. The report also said the rupee could weaken to around 94–95 against the US dollar, ANI stated.
Analysts noted that prolonged disruptions in the Strait of Hormuz, delays in restoring energy supplies from affected producers and continued geopolitical tensions could increase pressure on India’s external sector.
The report said the estimate assumes that the government may cut excise duties to offset losses faced by oil marketing companies on petrol and diesel. It also takes into account higher subsidies for Liquefied Petroleum Gas (LPG).
According to Elara Securities, each additional month of crisis with crude prices around USD 100 per barrel could increase the Centre’s fiscal burden by about Rs 30,000 crore, mainly due to losses incurred by oil marketing companies.
The report added that a prolonged crisis could also have wider economic effects, including lower tax collections due to slower growth, which could put further pressure on government finances.
While a short-term rise in oil prices could be managed through existing fiscal buffers, analysts warned that a prolonged period of high crude prices and geopolitical tensions may increase fiscal risks and could even force the government to cut back on capital expenditure.
