[NEW DELHI A plunge of nearly half in oil prices could help Indian Finance Minister Arun Jaitley reap a fiscal windfall of at least US$12 billion when he presents his 2015/16 budget in February, two government sources told Reuters.
The savings would come in the form of reduced fuel subsidy costs and higher petrol and diesel levies, the sources said. In addition, finance ministry officials have proposed restoring a crude oil import duty that was scrapped in 2011.
As a result, the government would claw back most of the money that India saves on oil imports. That would help Mr Jaitley hit borrowing targets but dilute any boost to consumption in Asia's third-largest economy.
Energy-hungry India imports around 4 million barrels of oil per day and the net cost of the country's oil imports is expected to total US$88 billion in the fiscal year to next March, based on a budgeted oil price of US$105 per barrel.
Officials drawing up Mr Jaitley's first full-year budget are pencilling in a view that oil prices will average US$65-US$70 in 2015/16. That would cut the national import bill by US$18 billion - or 0.9 per cent of GDP, they reckon. "Benefits from the fall in oil prices would reflect in the budget through lower oil subsidies and higher tax projections next year," one senior finance ministry official told Reuters.
The sources estimate that the overall fiscal boost can total US$12 billion). More than half would come from savings on oil subsidies.