Oil's fall to bring down fertilizer subsidy burden, ease fiscal strain

Cooling crude oil prices are expected to ease India's fertilizer subsidy burden and import bills, in a spot of relief for the economy navigating a raging tariff war.

- Rhik Kundu & Subhash Narayan

Cheaper oil also promises to lower current account deficit (CAD), ease inflation and stabilize the rupee.

The government has budgeted ₹1.68 trillion for fertilizer subsidies in FY26. While such allocations are typically increased during the year, current trends suggest the Centre may manage to bring down the subsidy bill, two people aware of the matter said.

"If crude prices remain soft, the fertilizer subsidy bill could stay within the budgeted ₹1.68 trillion for FY26, and may even fall by 5-10%," one of the two people mentioned above said on the condition of anonymity.

Softer crude prices will ease fiscal pressure amid broader economic challenges, the person added.

Cheaper oil could help India save ₹45,000-50,000 crore in import bills, assuming consumption remains at FY25 levels and rupee remains stable during the year, and average global crude oil prices remain at $60-65 a barrel. Subsidy savings could free up fiscal space for increased public investment in infrastructure and welfare. At the same time, falling input costs improves profit margins in energy-intensive sectors, strengthening the overall investment climate.