For years now, the ruling BJP-NDA establishment and its ecosystem have tried to sell Indians a remarkably convenient story. Petrol and diesel prices, they insist, are high because the country is still paying for the sins of the UPA era.
The villain of the piece is the infamous "oil bond". The phrase has now been repeated so often that it has acquired the aura of a civilisational burden.
One would imagine that India is still staggering under some catastrophic liability inflicted upon the nation by fiscal vandals. The numbers tell a very different story. Oil bonds were issued primarily between 2005 and 2010 by the United Progressive Alliance government to compensate public-sector oil marketing companies for selling fuel below market rates during an era of extraordinarily high global crude prices.
Brent crude crossed $140 a barrel in 2008. Even from 2011 to 2013, crude prices largely hovered above $100 per barrel. Instead of sharply increasing retail fuel prices overnight and triggering an inflationary shock, the government deferred part of the burden by issuing sovereign-backed bonds to oil companies.
The total principal amount of oil bonds issued was around ₹1.34 lakh crore. Interest payments continued over time, with redemption schedules extending into the Modi years. The government repeatedly claimed that principal plus interest together imposed a burden of roughly ₹2.5 lakh crore over the years. Even if one accepts the government's own framing entirely, the question remains unavoidable. What exactly happened after 2014?
When Narendra Modi took office in May 2014, central excise duty on petrol stood at ₹9.48 per litre and on diesel at ₹3.56 per litre. Then came the great global crude collapse. Between June 2014 and early 2016, Brent crude crashed from above $110 per barrel to below $30 per barrel. It was one of the sharpest collapses in modern oil market history. Globally, governments used the slump to stimulate economies, reduce consumer burden and improve purchasing power.
India, though, chose another path. Instead of allowing consumers to fully benefit from low crude prices, the Union government repeatedly raised excise duties on petrol and diesel. The increases came in wave after wave -- November 2014, December 2014, January 2015, February 2015, November 2015, January 2016, March 2016 and several more thereafter.
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Each increase was justified as fiscally necessary. But cumulatively, the effect was staggering. By May 2020, during the pandemic year and amid another crude collapse, excise duty on petrol had risen to ₹32.98 per litre and on diesel to ₹31.83 per litre. Read that again carefully. Petrol excise duty rose from ₹9.48 to nearly ₹33. Diesel excise duty rose from ₹3.56 to nearly ₹32. This was not some kind of marginal adjustment. This was a complete restructuring of fuel taxation. And it happened while crude prices were dramatically lower than during the UPA years that supposedly necessitated oil bonds in the first place.
The Centre's own revenue figures expose the scale of the extraction. In 2014-15, the Union government earned around ₹1.72 lakh crore from the petroleum sector through duties and taxes. By 2021-22, that figure had crossed ₹4.92 lakh crore. Between 2014 and 2024, cumulative central excise collections from petroleum products ran into several tens of lakh crores.
Various estimates place the figure above ₹30 lakh crore from excise duties alone across the decade. And if one includes the broader petroleum sector contribution, including CESSes and associated revenues, the number climbs even higher.
So the public was effectively told this: that a liability of roughly ₹1.3 lakh crore in oil bonds justified a taxation regime that extracted more than thirty times that amount from ordinary Indians over a decade.
And the burden did not remain confined to motorists. Fuel is not merely a commodity in India. It is a transmission mechanism for inflation across the entire economy. Every increase in diesel prices affects freight. Freight affects food prices. Food prices affect household inflation. Transport affects construction, agriculture, fisheries and small businesses. Auto rickshaw drivers, delivery workers, taxi operators and farmers bear the first shock. The middle class absorbs the next one through cascading price increases across the board.
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The pandemic period made the contradiction even starker. In 2020, when global crude prices collapsed again and benchmark oil prices briefly touched historic lows internationally, Indian consumers expected substantial relief. Instead, excise duties were raised aggressively once more.
Reports and parliamentary data later showed that excise collections from petroleum products surged enormously during this period. The government effectively used the crude collapse as a fiscal opportunity. Consumers were denied the benefit when crude fell. Consumers were immediately burdened when crude rose. That asymmetry is what angers people.
The official defence, of course, is that fuel taxes funded welfare schemes, infrastructure spending and pandemic relief. That is partly true. Fuel taxation became one of the most dependable revenue streams for the Union government, especially after GST reduced fiscal flexibility elsewhere. But then, that is precisely the point. Fuel prices were kept high not because oil bonds made it unavoidable, but because high fuel taxation became economically and politically convenient.
The "oil bonds" argument survives largely because it is rhetorically useful. It transforms a conscious taxation policy into inherited victimhood, and it reframes a deliberate fiscal choice as unavoidable national sacrifice. Yet the timelines refuse to cooperate with the narrative.
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The UPA issued oil bonds when crude was above $100 per barrel. The Modi government raised excise duties sharply when crude oil crashed to $30 a barrel or below. That single contrast demolishes most of the mythology. And perhaps the greatest irony of all is this. The same political ecosystem that once thundered about fiscal irresponsibility eventually built one of the most tax-dependent fuel regimes India has ever seen.
The author is a National Award winner for Best Narration and an independent political analyst. Views expressed are personal