Government proposes Rs. 41 billion diesel subsidy amid funding concerns
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The government has proposed a Rs. 41 billion fuel subsidy to shield consumers from rising diesel prices, according to HNB Stockbrokers. The subsidy equals 2.5 percent of the Rs. 1.6 trillion primary surplus reported for the first eight months of 2026.
However, analysts warn the surplus relies on strong tax revenue and low capital spending. Only Rs. 436 billion of the Rs. 1,369 billion capital budget had been spent by August, and World Bank data showed just 8 percent of Rs. 500 billion for Cyclone Ditwah reconstruction released by mid-year.
Including an earlier Rs. 57 billion subsidy, total fuel subsidies this year reach about Rs. 98 billion. The IMF has said assistance should be "properly targeted, budget-consistent, costed, and time-bound." The subsidy pays Rs. 70 per liter regardless of vehicle type. Diesel was sold Rs. 47 below cost in August; CPC losses reached Rs. 60 by September.
