Finance Minister Nirmala Sitharaman ruled out a reduction in excise duty on gasoline and diesel to help lower costs, which have reached an all-time high, citing the restrictions of payments in replacement of formerly subsidised fuel.
During the previous Congress-led UPA government, gasoline and diesel, as well as cooking gas and kerosene, were sold at subsidised prices.
Instead of paying for the subsidy to restore the artificially suppressed retail selling price in line with the cost that had risen due to international rates crossing USD 100 per barrel, the government issued oil bonds to state-fuel merchants totaling Rs 1.34 lakh crore.
These oil bonds, as well as the interest on them, are currently being paid.
“I would have been in a position to lower excise duty on petrol if I didn’t have the burden of servicing the oil bonds,” she told reporters here. “By issuing oil bonds, the previous government made our work harder. Even if I wanted to do something, the oil bonds were prohibitively expensive.”
Sitharaman said the interest on oil bonds paid in the last seven years totaled Rs 70,195.72 crore, after raising excise duty on gasoline and diesel to record highs to boost revenue collections last year. Only Rs 3,500 crore of the Rs 1.34 lakh crore in oil bonds has been paid in principal, she said, with the remaining Rs 1.3 lakh crore due for repayment between this fiscal and 2025-26.
This fiscal year, the government must repay Rs 10,000 crore (2021-22).In 2023-24, another Rs 31,150 crore is required to be reimbursed, followed by Rs 52,860.17 crore in 2024-25 and Rs 36,913 crore in 2025-26. “Interest and debt repayment take up a major portion of the budget. What an unjust weight you’ve placed on me, “she stated “In 2014-15, the opening amount was around Rs 1.34 lakh crore, with interest repayments totaling Rs 10,255 crore. Since 2015-16, the annual interest cost has been Rs 9,989 crore.”
Last month, Minister of State for Petroleum and Natural Gas Rameswar Teli told Parliament that the Union government’s tax collections on gasoline and diesel increased by 88 percent to Rs 3.35 lakh crore from Rs 1.78 lakh crore the previous year. In the pre-pandemic fiscal year 2018-19, excise collections totaled Rs 2.13 lakh crore. Last year’s tax hike had no effect on retail prices because they were adjusted against the reduction that was needed due to the drop in international oil prices.
However, as demand has increased, worldwide oil prices have risen, resulting in record-high gasoline and diesel prices across the country. Petrol costs more than Rs 100 per litre in more than half of the country, and diesel costs more in Rajasthan, Madhya Pradesh, and Odisha.