Budget to assume crude oil price of $55-$60 bbl for FY18

Opec announced it will reduce production by 1.2 mn barrels to 32.5 mn barrels a day from Jan 2017

Budget 2017 is being prepared assuming an average crude oil price of $55-60 a barrel for the coming financial year. At those prices, the petroleum subsidy bill for next year would be a comfortable Rs 26,000-27,000 crore, similar to this year, it is assumed.

If the oil prices cross $65 mark, the government could come up with a burden-sharing mechanism, where higher prices will be equally absorbed by both consumers and the government. 

The Opec has announced it will reduce production by 1.2 million barrels a day to 32.5 million barrels a day from January 2017, which could lead to a higher crude oil price regime.