RBI Governor Shaktikanta Das has said high fuel prices not only impact cars and bike users but manufacturing, transportation and other sectors as well. Das, while speaking at the 185th Foundation Day Celebration of Bombay Chamber of Commerce and Industry, said diesel and petrol prices do have an impact on the cost side. "They play as a cost-push factor across a range of activities. It's not just passengers who use cars and bikes. High fuel prices also have an impact on the cost of manufacturing, transportation and other aspects," he added.
Diesel &petrol prices do have an impact on the cost side. They play as cost push factor across a range of activities. It's not just that passengers who use cars and bikes. High fuel prices also have an impact on cost of manufacturing, transportation & other aspects: RBI Governor pic.twitter.com/zn4AzB5Ag8— ANI (@ANI) February 25, 2021
He advised the Centre and states to cut taxes. "There is a need for coordinated action between the Centre and states to reduce taxes because there are indirect taxes levied by both of them."
However, he also agreed that there's pressure on both states and the Centre to raise revenue amid pandemic, and that it requires high sums of money to enable the country and people to come out of the COVID stress. Das said he was confident that states and the Centre will take a positive decision in a coordinated manner.
In the minutes for the Monetary Policy Committee meeting released on Monday this week too, Das had said that "calibrated unwinding" of taxes is necessary to reduce price pressures in the economy. "Proactive supply-side measures, particularly in enabling a calibrated unwinding of high indirect taxes on petrol and diesel - in a coordinated manner by centre and states - are critical to contain the further build-up of cost-pressures in the economy," he said.
Fuel prices are breaking new records every day in India as the central government shies away from cutting excise duty to mop-up more revenue amid coronavirus pandemic. Taxes levied by the Centre and states constitute more than half of petrol and diesel prices, accounting for 60 per cent of the retail cost of the former and 54 percent of the latter.
As the Centre imposed the first lockdown in March 2020, it had raised excise duty by Rs 13 per litre on petrol and Rs 16 per litre on diesel from March-May 2020. Interestingly, crude oil prices at that time hovered around Rs 19.9 per barrel.
While the Centre has not taken any decision to cut taxes on fuel despite unprecedented rise in the prices, four states have recently decided to cut taxes. Meghalaya has given the biggest relief by cutting Rs 7.4 per litre on petrol and Rs 7.1 on diesel. It has also cut VAT on petrol and diesel by Rs 2. Last month, Rajasthan reduced Value Added Tax (VAT) from 38 per cent to 36 per cent. Poll-bound West Bengal has cut VAT on petrol and diesel by Re 1 on Sunday. Assam has also withdrawn an additional tax of Rs 5, which was imposed last year to generate revenue amid the COVID-19 crisis.