Finance Minister Nirmala Sitharaman on Tuesday hinted that the current spike in international oil prices may upset provisions of the Union Budget as she voiced concern over the impact of spiralling oil rates on the Indian economy.

“It (rising crude prices) will have a bearing. We have made some provisions for it in the Budget (for fiscal 2022-23). But that provision is only based on some average (price of oil) prevailing earlier but now is beyond that. So, we will have to see how we can work it out,” she said at an interactive session organised by BJP’s Karnataka unit in Bengaluru.

International crude oil prices shot up to 14-year high of USD 140 per barrel on Monday before retracting to near USD 129 on Tuesday. But even this rate is 50 per cent higher than the USD 80-87 range of January when most of the Budget 2022-23 would have been prepared.

Sitharaman presented the Budget on February 1. India relies on overseas purchases to meet about 85 per cent of its oil requirement, making it one of the most vulnerable in Asia to higher oil prices. The twin blows of oil prices, already up more than 60 per cent this year, and a weakening rupee may hurt the nation’s finances, upend a nascent economic recovery and fire up inflation.

“It will certainly have an impact on the Indian economy,” Sitharaman said. “How much we are going to be prepared to take it as a challenge and mitigate the impact is something which we will have to see as we go (along).”

International oil prices have been on the boil ever since Russia put its forces on the Ukraine border last month. They spiked after it invaded the eastern European nation on fears that oil and gas supplies from energy giant Russia could be disrupted, either by the conflict in Ukraine or retaliatory Western sanctions.

While Western sanctions have so far kept energy trade out, a prospect of a full embargo of Russian oil and products is leading to the latest rally in international oil prices.

But Indian consumers have so far largely remained insulated as PSU oil firms have for over four months not changed prices in view of assembly elections in states like Uttar Pradesh. While petrol and diesel prices are due to revision anytime as the polling has ended, the indirect effect on the industry in the form of higher input cost is already being felt across sectors.

There are concerns that elevated oil prices will fire up inflation which is already above the RBI’s tolerance range of 6 per cent. Noting that India imports more than 85 per cent of its crude oil requirements, Sitharaman said when oil prices go up, it is a matter of concern and “now we will have to see how it pans out”.