NEW DELHI: Amid growing disquiet over high fuel prices, the Prime Minister’s Economic Advisory Council (PMEAC) discussed taking a political call on taxing oil with a few members expressing concern at the spillover impact such a rise may have on economic recovery.
“Petrol and diesel price cannot be used as cash cow forever. Some political intervention is required as it will finally dampen the consumer spending and will delay the recovery. A delay in intervention will prolong the recovery process. Focus needs to be on promoting growth of industry and jobs,” a senior member of the PMEA C told The New Indian Express. The member added that recovery will be fragmented if private consumption is not stepped up.
Similar concerns were raised recently by the Reserve Bank of India, as gleaned from the minutes of its monetary policy meet.
“The rising trajectory of international commodity prices, especially of crude, together with logistics costs, pose upside risks to the inflation outlook. Excise duties, cess and taxes imposed by the Centre and states need to be adjusted in a coordinated manner to contain input cost pressures emanating from petrol and diesel prices,” the minutes said.
“Timely supply-side policy measures with regard to petrol and diesel, edible oil and pulses, among others, would be critical to bringing about a durable softening of price pressures,” the RBI added.
High fuel price and food cost pushed up retail inflation, measured by the consumer price index (CPI), to 6.3% in May, overshooting the RBI highest band of 6%.
Even the wholesale price inflation has reached 12.94%, highest since 2013, pushed mainly by fuel and power inflation, which was up by 37.6% in May. Experts claim this will make things difficult for the RBI. Petrol and diesel prices are at all-time highs though crude oil fell nearly 2% from its highest level this year on June 17 to $72.23.
Further jump
Petrol and diesel prices were on Friday increased again by 27 paise and 28 paise, raising their cost in Mumbai to Rs 103.08 and Rs 95.14 per litre.
Clarification
The Economic Advisory Council to the Prime Minister (EAC-PM) has not made any recommendation to the Centre to take a political call on cutting fuel tax. This was clarified by K Rajeswara Rao, Principal Adviser, EAC-PM, in response. However, a member of the panel confirmed to our reporter that the matter was indeed discussed at one of its recent meetings during which a few members expressed concern at the spill-over impact of high fuel prices dampening economic recovery - Editor