Why Don't UPA-era Oil Bonds Explain the Current High Fuel Prices?
Recent claims suggest that the current high fuel prices in India are due to UPA-era oil bonds and not due to the fact that India isn't importing oil from Iran or increasing prices set by OIC countries. This article aims to clarify these points and present a detailed analysis.
Current Context and Pricing
Arguments put forth by the opposition and certain platform updates suggest that the current admin is taking advantage of the situation to increase fuel prices. However, a careful examination of the data tells a different story. For instance, at the time when crude oil was at 140 USD/bbl, petrol was priced at 60 INR. Now, with the average purchase of 80 USD/bbl and the rupee-to-USD rate of 76 INR, the OMC (Oil Marketing Companies) are finding it challenging to reduce fuel prices. This supports the argument that current high fuel prices are more due to external factors rather than oil bonds.
UPA Government's Decision to Issue Oil Bonds
In 2011-12, recognizing that global oil prices were rising, the UPA government decided to subsidize a significant portion of oil costs through oil bonds. This decision was aimed at keeping fuel prices down, with the price of petrol hovering around 69.80-72.75 INR per liter. While superficially, this might seem like an excellent decision, it comes with its own set of challenges.
The UPA government borrowed 3.92 trillion INR for this purpose, promising to pay the subsidized sum to the bond holders with a specific interest. They also promised to repay the principal amount. Over the years, they managed to pay off some of this amount, with Rs. 2.05 trillion remaining as of 2023. This amount needs to be paid back along with the interest, currently at around 15,820 crore INR annually.
Analysis of Current Payments and Debts
The non-payment of interest in the years 2017-18, 2019-20, and 2020-21 has led to an increase in the current debt, which now stands at 2.28 trillion INR. According to calculations, an increase of Rs. 4.76 per liter in the fuel price is enough to cover this debt and the interest over the next seven years. At a base rate, petrol should cost around 82.30 INR per liter, significantly lower than the current 103.50 INR.
This analysis shows that while the UPA government did issue oil bonds, the current high fuel prices are not primarily due to these bonds. Rather, the reasons include international oil prices, the exchange rate of the Indian Rupee, and the consequent strain on the OMCs.
Conclusion
The claims that the current high fuel prices are due to UPA-era oil bonds are misleading and oversimplified. The real issues contributing to the current situation are more complex and multifaceted, involving global oil prices and the economic decisions of the current government.
The opposition's argument that it is just to hoodwink the people and looting the country lacks substantiation. Instead, the data clearly indicates that the current fuel prices are influenced by external factors far more than by the UPA-era oil bonds.
Related Keywords: Oil Bonds, Subsidies, Fuel Prices, UPA Government, Current Fuel Prices