How Oil Bonds Once Shielded India from Fuel Price Shocks Explained
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Oil Bonds Explained: How India Battled Fuel Shocks
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CNBC TV18•12-03-2026, 14:53
Oil Bonds Explained: How India Battled Fuel Shocks
•Oil bonds are special government securities issued to OMCs (Indian Oil Corporation, Bharat Petroleum Corporation Limited, Hindustan Petroleum Corporation Limited) to compensate for losses from selling subsidized fuel.
•Used by the UPA government (FY2005-FY2010) to manage fiscal burden during record crude price surges, like $147.50 per barrel in 2008.
•They helped defer the fiscal impact, preventing immediate widening of the fiscal deficit.
•Repayments, including interest, are ongoing, constraining the current government's fiscal space; total payout projected at ₹2.6 lakh crore by 2026.
•Despite current global crude price spikes, retail fuel prices in India are unlikely to rise immediately, with OMCs expected to absorb the impact.
