Oil Industry Development Fund Utilization for Fertiliser Subsidy

For the first time, the government is planning to use the Oil Industry Development Fund (OIDF) to partly finance its fertiliser subsidy programme for the fiscal year 2025-26.

Financial Strategy

• The finance ministry has budgeted ₹23,000 crore as additional resources to be sourced from dedicated reserve funds, including the OIDF, the Agriculture Infrastructure and Development Fund, and the Universal Service Obligation Fund.
• This move follows the government’s cessation of off-Budget borrowing, aiming to reduce fiscal deficit with greater transparency.

Legislative Background

• The Oil Industry Development Act permits the use of OIDF for fertilisers.
• The Act was a response to the 1973 oil crisis, aiming for self-reliance in petroleum and related products.

The OIDF collects funds from a cess on crude oil and natural gas, accumulating ₹12,040.50 crore by March 31, 2024.

Fiscal Management

• Reserve funds ensure transparency by earmarking surplus funds for specific expenditures.
• The government's fiscal deficit target for FY26 is 4.4% of GDP, down from 4.8% in FY25.

Subsidy Allocations

• The FY26 Budget estimates total subsidies at ₹3,83,397 crore, slightly lower than FY25's revised estimate.
• Fertiliser subsidies are allocated ₹1,67,887 crore, a 2% decrease from FY25's revised estimate.
• ₹11,600 crore for fertiliser subsidy will come from the OIDF reserve fund.