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Oil bonds are special bonds issued by the GoI to the oil marketing public sector companies to cover-up their losses in marketing. In case of global price rise in crude oil the companies needed to increase prices of their products. But to avoid inflationary effects on the economy, the oil marketing companies were not allowed to do so—ultimately leading them to fetch huge losses. So that these companies are able to arrange funds (to fill up their losses), the government used to issue oil bonds. These bonds, backed by sovereign power, are marketable in the financial system of India. After the domestic prices of petrol, diesel, lubricants and aviation turbine fuel (ATF) have been linked to the international crude prices need of issuing such bonds have not been felt. The declining global crude oil prices of recent times have
also helped the GoI to avoid such instances.