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Published: Mar 01, 2023
Updated: Mar 01, 2023

India prioritizes cheaper fuel imports to mitigate global commodity price hike

As the conflict between Russia and Ukraine drives up global commodity prices, India has made strategic decisions to import cheaper fuel from Russia and other sources. Finance Minister Nirmala Sitharaman spoke at a recent event in Gangtok about how the government had to more than double the budget allocation for fertilizer subsidies to insulate farmers from the sharp increase in global prices. In this article, we will discuss how India is managing its fuel and fertilizer subsidies in light of global economic uncertainties.

Managing Global Economic Uncertainties:

As global commodity prices soar, India is managing its economic uncertainties by prioritizing cheaper fuel imports. With Russia’s share in India’s crude oil import basket rising to a record 28% in January, India is balancing its energy needs while keeping the country’s interest in mind. The US and its allies have imposed tough economic sanctions on Russia for invading Ukraine, making it difficult for India to abandon a cheaper source of fuel. To mitigate inflation and keep its growth story intact, India needs to continue its strategic decisions.

Enhancing Budget Outlay on Fertilizer Subsidies:

The spike in fertilizer prices in the last few years has forced India to enhance the budget outlay on subsidies to insulate farmers. Finance Minister Sitharaman cited an example of how the government had to make provisions in the FY23 budget to ensure farmers are not starved of fertilizer, which their land needs. The Centre’s total fertilizer subsidy bill is estimated to be Rs 2.25 trillion for FY23 as against the budget estimate of Rs 1.05 trillion and the actual Rs 1.54 trillion (including dealer and manufacturer) in FY22. Thus, enhancing budget outlay on subsidies has become crucial for India to insulate farmers from the sharp increase in global prices.

Strategy focuses on keeping domestic interests on priority

India is facing global economic uncertainties, and managing its fuel and fertilizer subsidies has become crucial to mitigate the impact of global commodity price hikes. The government’s strategic decisions to import cheaper fuel and enhance budget outlay on subsidies to insulate farmers from price hikes are commendable. India needs to continue to make such strategic decisions and balance its energy needs while keeping the country’s interest in mind.