Reserve Bank of India governor Shaktikanta Das said there are concerns with cryptocurrencies. Photo: AFP

India’s central bank chief has called for coordinated action by the federal and state governments to reduce taxes on gasoline and diesel to address soaring prices. Reserve Bank of India Governor Shaktikanta Das said federal and state governments need to work together as taxes are levied at both levels.

Gasoline prices have breached the 100-rupee (US$1.37) mark in some states, while diesel was selling above 90 rupees in some parts of the country. Interestingly, the federal and state taxes make up for 60% of the retail selling price of gasoline and over 54% of diesel. The federal government levies 32.9 rupees per liter of excise duty on gasoline and 31.8 rupees a liter on diesel. Though some states, including Rajasthan, Nagaland, have reduced taxes to rein in prices, the federal government has so far left its excise duty rates unchanged.

While taking part in an event organized by the Bombay Chamber of Commerce, the central bank governor said high fuel prices “do have an impact on the cost side, and they act as a cost-push factor across a range of activities.” It is not just passengers who are impacted, high petrol and diesel prices impact the cost of manufacturing, transportation and other aspects. “There is a need for coordinated action, and a coordinated and calibrated reduction of taxes,” the governor added.

However, he also pointed out that both the federal and the state governments have their revenue pressures and they are required to spend large sums of money to enable the country and the people to come out of the Covid-19 pandemic stress. But he felt the impact on inflation has to be considered. “I’m sure, going forward, governments will take some positive decisions in a coordinated manner [with regard to the fuel prices],” the governor said.

Cryptocurrencies

Shaktikanta Das said the central bank has many reservations regarding cryptocurrencies and their effect on the economy. He said the bank has communicated its concerns to the government and it may soon take a call on the issue.

The Indian government is also wary of cryptocurrencies and feels that the existing laws are inadequate to deal with them. It has formed an inter-ministerial committee to look into the issue and plans to introduce a new bill.

The central bank is reportedly working on its own digital currency, but the governor clarified that it will be different from cryptocurrencies. He said the bank does not want to be left behind in the technological revolution, and that means deriving benefits from blockchain technology.