Fuel Price Hike: RBI Governor Shaktikanta Das Asks Govt To Cut Taxes On Petrol & Diesel

In India, the fuel prices witnessed a steep climb over the past week, with petrol price breaching the Rs 100 mark and diesel costing around Rs 90 in many cities.

New Delhi: Reserve Bank of India Governor Shaktikanta Das called for reduced indirect taxes on petrol and diesel fuel to restrict sensitive fuel prices at a reasonable level. In India, the fuel prices witnessed a steep climb over the past week, with petrol price breaching the Rs 100 mark and diesel costing around Rs 90 in many cities.

"CPI inflation excluding food and fuel remained elevated at 5.5% in December, due to inflationary impact of rising crude oil prices and high indirect tax rates on petrol and diesel, and pick-up in inflation of key goods and services, particularly in transport and health categories," RBI governor noted in the MPC minutes, published on Monday.

According to Das, "calibrated unwinding" of taxes is necessary to reduce the economy's price pressures.

"Proactive supply-side measures, particularly in enabling a calibrated unwinding of high indirect taxes on petrol and diesel - in a coordinated manner by center and states - are critical to contain further build-up of cost-pressures in the economy," said the RBI Governor.

Taxes levied by the Center and the States account for over 60% of the cost of petrol and 54% of diesel price. In India, petrol and diesel prices are revised daily by the oil marketing companies according to international benchmark prices and foreign exchange rates.

Even as states like Meghalaya, Rajasthan, Assam, and poll-bound West Bengal have reduced taxes on price-sensitive fuel, the central government has refused to cut excise duty despite the unprecedented rise in fuel prices in the past two months.

It may be noted that the center had raised excise duty by Rs 13 per liter on petrol and Rs 16 per liter on diesel from March-May 2020, after the national lockdown was announced in March 2020 and the crude oil price was hovering below $20 a barrel.

RBI's MPC members expressed the need to pursue an accommodative stance to ensure that economic recovery is tenser and broad-based.

The MPC meeting minutes, which took place from 3 to 5 February, revealed that all six members also noted lower consumer inflation, which brightened the outlook even as upside risks remained.

Last week, Finance Minister Nirmala Sitharaman said the Centre and State governments will have to work out together a mechanism to bring retail rates to reasonable levels.