Finance Minister Nirmala Sitharaman on Monday said that there will be no cut in excise duty on fuel as of now. She said the previous UPA government had reduced fuel prices by issuing Oil Bonds of ₹1.44 lakh crore. “I can’t go by the trickery that was played by previous the UPA government. Due to Oil Bonds, the burden has come to our government, that’s why we are unable to reduce prices of petrol and diesel,” she added.
The UPA government had issued bonds to state-owned oil companies to make up for the difference in the artificially suppressed retail selling price of fuel and the cost. These oil bonds and the interest thereon are being paid now.
The finance minister said that exchequer is burdened by interest payments being made for oil bonds floated by the Congress-led UPA government. The government has paid over 70,195.72 crore in interest in the last 5 years on oil bonds itself.
“If I did not have the burden to service the oil bonds, I would have been in a position to reduce excise duty on fuel. Previous government have made our job difficult by issuing oil bonds. Even if I want to do something I am paying through my nose for the oil bonds,” she said.
Of the ₹1.34 lakh crore of oil bonds, only ₹3,500 crore of principal has been paid and the remaining ₹1.3 lakh crore is due for repayment between this fiscal and 2025-26, the finance minister added.
The government has to repay ₹10,000 crore this fiscal year (2021-22). Another ₹31,150 crore is due to be repaid in 2023-24, ₹52,860.17 crore in the following year and ₹36,913 crore in 2025-26.
“A significant amount is going for interest payment and principal repayment. What unfair burden on me. “Opening balance in 2014-15 was about ₹1.34 lakh crore and interest repayment was ₹10,255 crore. Since 2015-16, interest burden each year is ₹9,989 crore.”
Sitharaman said the government still has to pay interest of ₹37,000 crores by 2026. “Despite interest payments, principal outstanding of over 1.30 lakh crores is still pending. If I didn’t have the burden of oil bonds, I would have been in a position to reduce excise duty on fuel,” she said.
“People are right to be concerned. Unless the Centre and states discuss a way out, there is no solution possible to this…There will be no cut in excise duty on fuel as of now,” the finance minister said.
Fuel prices are at record high in the country and the opposition leaders have been demanding the Centre to cut taxes to bring down petrol and diesel cost, which has crossed ₹100-mark in some states.
However, central leaders have on many occasion defended current tax on petrol and diesel, saying the government needs money to fund several schemes and build infrastructure.
Excise duty on petrol has been raised from ₹9.48 per litre in 2014 to ₹32.90 a litre now while the same on diesel has gone up from ₹3.56 a litre to ₹31.80.
Last month, Minister of State for Petroleum and Natural Gas Rameswar Teli told Parliament that the Union government’s tax collections on petrol and diesel jumped by 88 per cent to ₹3.35 lakh crore in the year to March 31 from ₹1.78 lakh crore a year back. Excise collection in pre-pandemic 2018-19 was ₹2.13 lakh crore.
In March this year, the Centre informed that its tax collections on petrol and diesel had jumped over 300 per cent in the last six years. The government collected ₹29,279 crore from excise duty on petrol and ₹42,881 crore on diesel in 2014-15 — the first year of office of the Modi government.
The collections on petrol and diesel rose to ₹2.94 lakh crore in the first 10 months of the current fiscal (2020-21), according to information furnished by the Minister of State in a written reply to a question in the Lok Sabha.
Together with excise duty on natural gas, the central government in 2014-15 collected ₹74,158 crore which has gone up to ₹2.95 lakh crore in April 2020 to January 2021 period.