Centre, states must take coordinated action to reduce fuel prices, says RBI Governor Shaktikanta Das

With petrol and diesel prices going through the roof, Reserve Bank of India Governor Shaktikanta Das said that there was a need for the Centre and states to take coordinated action and work towards reducing transport fuel prices.

Speaking at the Bombay Chamber of Commerce, Das said, “Diesel and petrol are not just used by passengers alone. They also impact the cost of manufacturing. There needs to be a coordinated and calibrated reduction of prices,” RBI Governor Shaktikanta Das said.

Das recognised that both the Centre and states were reeling under revenue pressure but added that higher fuel costs could again stoke inflation if not curtailed.

In India, fuel prices go up not only due to the rising crude oil rates but also due to higher Centre and state taxes.

Read: Oil tax cut will boost consumption demand, help revive Indian economy: Report

While the Centre collects Rs 32.90 as tax and cess on a litre of petrol; on diesel, the cumulative Central taxes and cess stands at Rs 31.80.

Das has called for reduction in indirect taxes and cess on petrol and diesel to contain the fuel prices, which have witnessed a steep hike in the past 10 days. Petrol is selling at Rs 100 per litre in some states.

Though inflation has softened in the past few months, RBI continues to be worried about its future trajectory.

"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," Das had said in the Monetary Policy Committee minutes released earlier this week.

"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," he said.