Budget creates new Oil Industry Development Fund to cover LPG, fertiliser subsidy shortfall

The government has introduced a new Oil Industry Development Fund (OIDF) in the latest Budget to bridge the funding gap for LPG and fertiliser subsidies. The fund outlay is set at ₹17,700 crore in the revised estimates for FY25 and ₹19,300 crore in the Budget estimates for FY26.
The OIDF will be financed through collections from the existing oil cess, ensuring a steady stream of resources to support key energy and agricultural subsidies. The move aims to insulate the subsidy burden from fiscal uncertainties and provide a dedicated pool of funds for managing price fluctuations.

With the addition of the OIDF, the government’s reserve funds have now expanded to 13, including the Agriculture Infrastructure and Development Cess (AIDC) and the GST Compensation Fund. The new fund is expected to enhance financial predictability in the oil sector while maintaining affordability for consumers and farmers.

Industry experts see this as a targeted intervention to stabilise subsidy financing at a time when global energy prices remain volatile. The government’s reliance on a dedicated fund rather than direct budgetary allocations could also help manage fiscal deficit concerns while ensuring continued support for essential subsidies.