Oil bonds
Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
Oil bonds are non-cash government securities that were issued to oil marketing companies between 2005 and 2010. They compensated these companies for selling fuel below cost. The government gave them bonds instead of cash, so it did not show the full cost in its budget at the time. The fiscal cost was pushed into later years, when the interest and principal had to be repaid.
Example
Repayment of these bonds runs through the 2020s. They are often cited in the debate over high fuel taxes, with the argument that part of today's fuel tax pays for oil bonds issued years ago.
Don't confuse with
- Direct cash subsidy: a cash subsidy is paid and recorded in the budget at once. Oil bonds hid the cost at the time and shifted it into the future.
Related concepts
- Government securities
- Dated securities
- State Development Loans
- Primary dealer
- Inflation-indexed bond
- Sovereign Gold Bond
- Fully Accessible Route
- Global bond index inclusion