The Finance Minister belaboured on challenges in paying off oil bonds created by UPA and said that’s the reason for the govt keeping the oil prices high for the last seven years, even when the crude prices plummeted from $120+ during UPA regime to $40+ when MODI ji took over; even now hovering around $63. The graph here tells you the real story!
Oil Bonds and Nirmala Sitharaman’s dig at UPA govt
During UPA (2004-14) period, when the prices of oil increased, Govt. gave subsidies to the people of India by reducing the prices of oil.
So, let us say if the Oil Marketing Companies (OMCs) like IOCL/BPCL/HPCL were selling the Petrol at Rs. 90 (at that time), Govt. asked OMCs to sell the petrol at Rs. 80 and Govt would pay Rs. 10/liter to OMCs. But Govt. actually did not pay in cash, rather Govt. issued “Oil Bonds” to OMCs of the total value of subsidy, which meant Govt. would not pay at that time but at a later date (whatever maturity specified on the bond). These “Oil Bonds” are basically a kind of debt paper issued by GoI which are now maturing.
So, the present Govt. (NDA) has to pay principal back and ofcourse it is already paying interest on these bonds since 2014 onwards. So, there is a burden on the present Govt. and hence the Govt. is not reducing the excise duty on Petrol/diesel even if the prices are high, as these excise duties are being used to pay for the interest/principal on oil bonds issued during UPA. (This is what our FM is saying).
Real Lowdown on the issue of Oil bonds and NDA oil tax mayhem !
Here is a lowdown of the oil bonds, oil tax and the bungling of our economy. This article is summation of the thread by @MaheshPeri on twitter..
1. Since NDA came to power, they taxed us close to 22.5 Lac Crore, repaid back only 3500 Crore and paid interest of 67,698 Crores. That is just about 3% of the fuel tax they collected. 97% of the oil tax is the cost of the way they handled the economy.
2. DIrect taxes are income tax, corporate tax and wealth tax. By having different tax slabs based on income/profits, they are seen as equitable. Indirect taxes are GST, Excise & Customs. They do not discriminate between rich and poor.
3. Our direct taxes in 2019, before the reduction in peak corporate tax rate from 30% to 22% was Rs.11.36 lac crores. This was 55% of total tax receipts. This move benefitted corporates who were profitable.
4. The reduction in corporate tax rate brought down our corporate taxes by 2.06 lac crores in just 2 years, from 6.63 lac crore in 2019 to 4.57 lac crores in 2021. These are profitable companies now paying lesser taxes.
5. These tax cuts announced with much fanfare before Modi’s trip to USA brought down the direct taxes share from 55% to 47% in 2 years without any positive impact on the capital formation, consumption or economic growth.
6. This loss in corporate taxes was recovered from the fuel tax receipts. The oil taxes paid by people increased from Rs. 0.74 Lac crores in 2014-15 to about Rs. 3.6 lac crores in 2020-21. They would be Rs.4.5 lac crores equallant to all corporates taxes.
7. The reduced corporate tax rate contributed to a buoyant stock market thus doubling BSE index from 25600 to 52000 today.
8. India always boasted of a equitable tax structure and direct tax slabs was a direction. Today, we make the auto drivers and taxi drivers pay so that we can pay lesser income/corporate taxes and also earn through stock market gains.
Modi regime today robs the poor to enrich the already rich. India is today, far from being an equitable and just country.