RBI Guv. Says Petroleum product prices have reached historic highs calls for policy action by Govt

Feb 5, 2021

Mumbai: In a significant admission, the Governor of Reserve Bank of India Shaktikanta Das on Friday said that petroleum product prices have reached historic highs due to the high indirect tax, and asked the Centre for policy action to ensure that the cost doesn’t not escalate further.

“Petroleum product prices have reached historic highs as international crude prices surged in recent months and the high indirect taxes remain, both in the Centre and States,” Mr Das said in his statement after announcing the bi-month monetary policy review.

“Going forward, concerted policy action by both Centre and States, is critical to ensure that the ongoing cost build-up does not escalate further,” Mr Das said.

Taking into consideration all these factors, the projection for CPI inflation has been revised to 5.2 per cent for Q4:2020-21, 5.2 per cent to 5.0 per cent in H1:2021-22 and 4.3 per cent for Q3:2021-22, with risks broadly balanced.

Mr Das said the sharp increase in industrial raw material prices have resulted in a broad-based increase in prices of services and manufacturing products in recent months.

Petrol and diesel prices have been hiked many times by the oil marketing companies with prices of petrol touching nearly a three figure mark per litre.
Indian fuel prices are fixed by what is known as the ‘dynamic fuel pricing’ system, where the Oil Marketing Companies (OMCs) calculate the oil price every day depending on the international crude oil prices, currency exchange, demand supply ratio and other financial parameters. The retail price that you get in your nearest petrol pump is inclusive of indirect taxes including excise duty; value-added tax and the dealer’s commission. The excise and VAT vary from state to state.

While the Central Government applies excise duty of fuel, State Governments add a value-added tax (VAT). VAT rates also vary drastically on both petrol and diesel across India. Various State Governments fix the VAT percentage as per their own economic dynamics.

–India News Stream