What are oil Bonds:
- Oil bonds were issued to offer cash subsidy to oil marketing companies (OMCs) in former Prime Minister Manmohan Singh’s UPA era, and also Atal Bihari Vajpayee’s NDA rule.
- These sovereign oil bonds, issued in favour of oil companies Indian Oil Corp, HPCL and BPCL, were transferable, allowing these companies to raise immediate cash at the time.
- The government, being the issuer, would bear the interest payments and redemption at maturity.
- During that time, OMCs were selling fuel at lower than international market prices to keep it affordable. The government compensated those companies for it.
- The government has a liability to pay Rs 20,000 crore in the current fiscal year 2021-22 in the form of bond repayment and interest on the outstanding oil bonds.
- Moreover, for the next six years, the government has a total debt obligation worth Rs 1.30 lakh crore.
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Why the fuel prices have been increasing consistently:
There has been a rise in the prices of crude oil in the international market. To fulfill the domestic needs, India has to import 80 per cent oil, which is the main reason for the rise in petrol, diesel prices.
