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Oil Bonds

Oil Bonds:

The Centre has argued that it cannot reduce taxes on petrol and diesel as it has to bear the burden of payments in lieu of oil bonds issued by the previous UPA government to subsidise fuel prices.

  • Before fuel prices were deregulated, petrol and diesel as well as cooking gas and kerosene were sold at subsidised rates during UPA rule.
  • Instead of paying direct subsidy to oil marketing companies from the Budget, the then government issued oil bonds totalling Rs 1.34 lakh crore to the state-fuel retailers in a bid to contain the fiscal deficit.
  • Citing the need to repay interest and principal components on these bonds, the Centre has now argued that it needs higher excise duty to help its finances.
  • The NDA government too has used a similar strategy to inject capital into state-owned banks and other institutions by issuing recapitalisation bonds worth Rs 3.1 lakh crore, which will come up for redemption between 2028 and 2035.

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