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

While Prime Minister Narendra Modi’s government faces growing clamour to rein in rising petrol and diesel prices by cutting taxes, the reason for it not yielding to the demand can be traced back to the early 2000’s. The present and the next governments have a bill worth Rs 1.3 lakh crore to pay, thanks to the then governments’ largesse of keeping petrol and diesel prices in check.

Of late, retail fuel prices hit over Rs 100 per litre in many states, including national capital Delhi. Notably, various central and state taxes make up for up to 60 per cent of fuel prices. The central government mopped up Rs 3.72 lakh crore in excise duty on crude oil and petroleum products in the last financial year 2020-21; while the state governments collected Rs 2.03 lakh crore in sales tax and VAT on petrol and diesel. On the other hand, the government has to pay towards the redemption of outstanding oil bonds worth over a lakh crore rupees.