RBI suggests cutting taxes to tackle rising fuel prices
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New Delhi: The Monetary Policy Committee of the Reserve Bank of India on Friday sought the Central and State Governments' coworking to control the frequent rise in fuel prices. The Center should be prepared to reduce excise duty and cess, and the states should be prepared to reduce regional taxes such as value-added tax or VAT as taxes compose 58% of the retail price of petrol and 52% of the retail price of diesel.
As the country battles a raging second wave of COVID-19, there is a need for unified action in this regard, said the RBI. Inflation may rise further. Rising prices of international commodities, including crude oil purchased from outside the country, will push up costs and inflation.
During the period from March to May last year, the Center increased excise duty on petrol by Rs 13 per litre and diesel by Rs 16 per litre. At present, excise duty on petrol is Rs 32.9 per litre and on diesel is Rs 31.8 per litre. As petrol and diesel are not under the purview of GST, each state charges different rates. In Madhya Pradesh and Rajasthan, where VAT is more than 30 per cent, petrol prices have already tripled.
The RBI further recommends a proactive approach with policy support from all sides to regain the growth witnessed to the second half of 2020-21 and enable recovery from the current economic crisis.