Why govt is not cutting petrol, diesel prices; Rs 1.3 lakh cr oil bond repayments due for cheap fuel in past

Of late, retail gas costs hit over Rs 100 per litre in lots of states, together with nationwide capital Delhi.

Whereas Prime Minister Narendra Modi’s authorities faces rising clamour to rein in rising petrol and diesel costs by reducing taxes, the explanation for it not yielding to the demand may be traced again to the early 2000’s. The current and the following governments have a invoice price Rs 1.3 lakh crore to pay, due to the then governments’ largesse of holding petrol and diesel costs in verify.

Of late, retail gas costs hit over Rs 100 per litre in lots of states, together with nationwide capital Delhi. Notably, varied central and state taxes make up for as much as 60 per cent of gas costs. Nonetheless, the federal government is ostensibly utilizing this tax to mop up cash for cost of dues in the direction of redemption of oil bonds price over a lakh crore rupees.

What are oil bonds? Why did governments difficulty?

Oil bonds have been issued in lieu of money subsidy to grease advertising firms (OMCs) in former Prime Minister Manmohan Singh’s UPA period, and likewise Atal Bihari Vajpayee’s NDA rule. These sovereign oil bonds, issued in favour of oil firms Indian Oil Corp, HPCL and BPCL, have been transferable, permitting these firms to boost instant money on the time. The federal government, being the issuer, would bear the curiosity funds and redemption at maturity. Throughout that point, OMCs have been promoting gas at decrease than worldwide market costs to maintain it inexpensive. The federal government compensated these firms for it.

The federal government has a legal responsibility to pay Rs 20,000 crore within the present fiscal yr 2021-22 within the type of bond compensation and curiosity on the excellent oil bonds. Whereas for the following six years, the federal government has a complete debt obligation price Rs 1.30 lakh crore.

Union Petroleum Minister Dharmendra Pradhan (earlier than the current Cupboard reshuffle) blamed the UPA regime for issuing oil bonds, saying that that is the principle purpose behind the hike in gas costs. He stated that the Congress-led UPA, left lakhs of crores dues which the Modi authorities has to pay within the coming years. He additionally said that there was an increase within the costs of crude oil within the worldwide market. To meet the home wants, India has to import 80 per cent oil, which is the principle purpose for the rise in petrol, diesel costs.

Final month, Amit Malviya, nationwide president of the IT cell of the BJP, in a tweet stated that the rise in petrol and diesel costs has been a legacy of UPA’s mismanagement. “We’re paying for the oil bonds that can come up for redemption beginning FY2021 until (2026), which have been issued by UPA to grease firms for not rising retail costs then! Dangerous economics, dangerous politics,” part of the tweet learn.

Whole oil bonds payout stands at Rs 1.30 lakh crore

Within the 2021-22 receipt price range, as per annexure 6E titled ‘Particular Securities Issued to Oil Advertising and marketing Firms In Lieu Of Money Subsidy’, pending liabilities associated to grease bonds have been Rs 1,30,923.17 crore. This implies an quantity of Rs 1,30,923.17 crore was the entire worth of pending oil bonds by the tip of 2020-21.

Particular Securities Issued to Oil Advertising and marketing Firms In Lieu Of Money Subsidy

Narendra Modi’s NDA authorities first got here into energy in 2014. Throughout its regime, two tranches of bonds, price Rs 1,750, every (Rs 3,500 crore), matured in 2015.

Two tranches of bonds, price Rs 1,750, every (Rs 3,500 crore), matured in 2015

Two oil bonds maturing this fiscal; Modi govt to pay Rs 20,000 cr

In 2019, Narendra Modi’s NDA authorities got here into energy for the second consecutive time. In response to the price range paperwork, oil bonds price Rs 41,150 crore are due for maturity between 2019-2024. In 2018, Union Petroleum Minister Dharmendra Pradhan stated that the federal government has paid round Rs 10,000 crore yearly as curiosity during the last decade. It’s doubtless that the federal government pays an analogous quantity of curiosity for excellent bonds for the present fiscal as properly. So, the entire bond compensation and curiosity on the excellent oil bonds stands round Rs 20,000 crore for the present fiscal.

Not simply UPA, however Atal Bihari Vajpayee-led govt additionally issued

Nonetheless, oil bonds have been issued not solely by the UPA authorities but in addition by Atal Bihari Vajpayee-led NDA authorities. In response to the price range speech of 2002-03, the then Finance Minister Yashwant Sinha stated that the federal government would difficulty oil bonds. “The Oil Pool Account shall be dismantled on April 1, 2002, and the excellent balances shall be liquidated by difficulty of oil bonds to the involved oil firms”