October 18, 2021, The Liberacy:- Oil bonds are a special type of security instrument issued by the government of a country. The bonds are of long-term nature with a usual period of maturity ranging from 10 to 15 years. Oil bonds are used to pay interest to the oil companies.
Oil bonds are issued to compensate for the avoidance of breaching the fiscal deficit target in any financial year, which means, “It is used to delay the current payout and putting a burden on future.”
In India, the UPA government led by then Prime Minister of India, from the Indian National Congress party, Dr. Manmohan Singh, between 2005 and 2010 issued oil bonds worth ₹1.4 lakh crore with this principal amount and interest burden for the future.
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The UPA government was successful in curbing petrol and diesel prices for a long time.
Dr. Manmohan Singh’s UPA government was successful in selling petrol and diesel at prices lower than the international market before the complete deregulation of rates.
The actions taken by the UPA government between 2005 and 2010 showed adverse effects in 2021 as about rupees ₹10000 crores worth of bonds matured in 2021 and so far, till 2021, only ₹35000 crores worth of bonds out of ₹1.4 lakh crore were matured, and the government has already paid ₹10000 crores in interest payment.
The bad seeds sown in the disguised face of oil bonds showed really bad consequences in 2021, and more was for the next decade.
The UPA government was thrown out of power in 2014 and was replaced by the Narendra Modi-led NDA government. The NDA government has been blaming the former UPA government for its wrong-doings, while UPA with its major party, the Indian National Congress accused the NDA government of not being capable enough to handle the crude oil prices.
There is almost an excise duty of 1/3rd on diesel and one third on petrol, as it fluctuates according to the international market and the NDA government is planning to bring the petrol and diesel under GST so as to avoid the local taxes which have a significant amount in the total price of petrol and diesel in India varying from state to state.
The oil bonds issued by the UPA government between 2005 and 2010 might have saved India from the 2008 world recession, which could have caused severe inflation, but has also been proved to be a curse for the current and the coming decade.
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