Re UPA govt oil bonds to lame for high fuel prices?
Fuel prices continue at record levels in the counhe fact that the government not reduced the additional it imposed during the panc is an important reason for s being at their current levhile ₹1.44 lakh crores in order to subsidise retail fuel prices. The annual average price of India’s crude oil basket (COB) increased from $55.72 per barrel in 2005-06 to $ 62.46 (2006-07), $ 79.25 (2007-08) and 83.57 (2008-09) before falling to $69.76 in 2009-10. In three out of these five years, the COB price was higher than what it is currently ($68.92 per barrel according to data from petroleum ministry on 17 August,2021). However, retail prices of petrol and diesel were much lower than what they are today.
The maximum price per litre of petrol and diesel in Delhi in 2005-06 was ₹43.49 and ₹30.45 respectively. This changed to ₹47.43 for petrol and ₹35.47 for diesel in the year 2009-10.
To be sure, the rupee price of COB has been increasing because of the depreciation of the rupee, which was 44.27 per dollar(average) in 2005-06, fell to 47.44 per dollar in 2009-10 and is at 74.28 per dollar at the moment (as on 17 August).
What is the current fiscal burden of oil bonds?
As admitted by the finance minister, the central government has to pay around ₹1.7 lakh crore for these accumulated liabilities. However, the 2021-22 union budget shows that the government does not intend to pay all of them in the current fiscal year. Budgetary allocation for oil bonds in the current fiscal year is just ₹9,989.96 crore in interest payments. This is only a fraction of the windfall gain to the union government from the additional petroleum taxes.
Union excise duties, which comprise the bulk of petroleum taxes increased from ₹2,39,452 crores in 2019-20 to ₹3,89,677 crores in 2020-21 (provisional numbers) and are expected to be ₹3,35,000 crores in 2021-22, as per Budget Estimates. If the government wanted, it could have used last year’s proceeds to settle almost all of the pending liabilities from oil bonds. As soon as the principal component is paid, interest liabilities will automatically cease to exist.
This increase in union excise duties happened as the central government increased excise duty on petrol by 65% to ₹32.98 per litre and diesel by 101% to ₹31.83 per litre between March 2020 and May 2020 in view of falling crude oil prices.
Can current government claim high moral ground on petrol-diesel prices?
It is a fact that the UPA incurred liabilities to provide relief from petrol-diesel prices. Reduction of petrol-diesel prices is something the Bharatiya Janata Party (BJP) consistently demanded when it was in the opposition.
Also, given the fact that both petrol-diesel prices are now deregulated (at least in principle), the government does not even have to incur a subsidy burden to bring down prices. What it will take to reduce petrol-diesel prices is the union government sacrificing its windfall tax gains.
With its revenue under pressure, it may be hesitant to do so. That, not oil bonds, would appear to be the problem.