The Centre has argued that it cannot reduce taxes on petrol and diesel as it has to bear the burden of payments in lieu of oil bonds issued by the previous UPA government to subsidise fuel prices.
Oil Bonds
Oil bonds are issued by the government to compensate oil marketing companies (OMCs) to offset losses that they suffer to shield consumers from rising crude oil prices.
Reasons for issuing Oil Bonds
These bonds were issued to OMCs in lieu of cash at a time when the central government used to administer or fix petrol and diesel prices.
