Union Finance Minister Nirmala Sitharaman said the government estimates that cutting excise duties on petrol and diesel will cause a revenue impact of over Rs 1 lakh crore [1].
The projection highlights the fiscal tension between maintaining low fuel prices for consumers and securing government revenue for public spending. As the government navigates global economic volatility, these losses could limit the budget available for other infrastructure, or social programs.
Speaking at the SIDBI 37th Foundation Day programme in New Delhi, Sitharaman addressed the challenges associated with fuel, fertilizer, and foreign exchange [2]. She said that "cutting excise duties on petrol and diesel will lead to a revenue impact of Rs 1 lakh crore" [1]. This loss is projected for the 2026 fiscal year [3].
Sitharaman also sought to clarify the origin of recent fuel price fluctuations. She said that fuel price hikes are from oil companies and not government policy, noting that the Centre has already absorbed a Rs 1 lakh crore hit [1].
The Finance Minister emphasized the need for economic stability and public trust during her address. She said that India cannot afford fear-mongering and that the government must provide confidence to the people through both words and actions [4].
While the government manages these fiscal pressures, the impact on the 2026 budget remains a primary concern for policymakers. The balance between absorbing these costs and allowing prices to rise at the pump continues to be a central point of domestic economic debate [2].
“Cutting excise duties on petrol and diesel will lead to a revenue impact of Rs 1 lakh crore.”
The government's willingness to absorb a Rs 1 lakh crore loss suggests a strategic priority to curb inflation and prevent public unrest caused by rising fuel costs. However, this fiscal sacrifice creates a significant gap in the 2026 projections, potentially forcing the government to either reduce spending in other sectors or seek alternative revenue streams to maintain its fiscal deficit targets.
