Fuel price hike: RBI Governor calls for calibrated unwinding of high indirect taxes on petrol, diesel

New Delhi: Reserve Bank of India governor Shaktikanta Das has called for calibrated unwinding of high indirect taxes on petrol and diesel – in a co-ordinated manner by centre and states to contain the fuel prices.

"CPI inflation excluding food and fuel remained elevated at 5.5 per cent 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. Proactive supply side measures, particularly in enabling a calibrated unwinding of high indirect taxes on petrol and diesel – in a co-ordinated manner by centre and states – are critical to contain further build-up of cost-pressures in the economy," the RBI minutes of meeting said.

Petrol and diesel prices in India have witnessed a sharp increase since the last 12 days, with prices of petrol nearing Rs 91 per litre and Rs 97 per litre in Delhi and Mumbai respectively.

The Reserve Bank`s Monetary Policy Committee members, in their recent meeting, expressed the need to continue with the accommodative stance to ensure that economic recovery gains greater traction and becomes broad-based.

The minutes of the MPC meet which took place February 3-5, revealed that all six members also noted lower consumer inflation brightened the outlook even as upside risks persist.

Amid an outcry over record high Petrol and diesel prices, Union Finance Minister Nirmala Sitharaman last week said the Centre and state governments will have to together work out a mechanism to bring retail rates to reasonable levels.

Sitharaman, who had increased central excise duty on petrol and diesel by a record margin last year to mop up gains arising from international oil prices plunging to two- decade low, remained non-committal on cutting taxes to give relief to consumers. She went on to explain the tax structure and how production cuts by oil cartel OPEC and its allies had led to a rally in the international oil prices, leading to a hike in retail rates in India.

She, however, said the answer may lie in bringing petrol and diesel under the Goods and Services Tax (GST) regime, which will end the cascading impact of taxes and bring uniformity.