CEA Subramanian hints that govt is unlikely to cut fuel taxes: Report

Chief Economic Advisor KV Subramanian. (Image: ANI)

Chief Economic Adviser (CEA) Krishnamurthy Subramanian hinted that the government is unlikely to cut fuel taxes, though petrol and diesel rates are a record high."When we look at it from the inflation perspective, what is the contribution (of petrol and diesel) to inflation is something we have to keep in mind. So we should speak based on data on all these aspects," he told Mint, when asked if cut in fuel taxes is on the cards.

Also read: Explained | Who is gaining from the sharp rise in fuel prices?

Subramanian said food inflation is a bigger concern. He said that reducing fuel taxes may not have a significant impact on retail inflation, since the weightage in the index is low.

"If you look at the last 6-7 years, anywhere between 35-60 percent of contribution to retail inflation comes from food inflation," he said as quoted by the publication.

Also read: June retail inflation rises 6.26 percent, official data shows

"Weightage of petrol and diesel in CPI (Consumer Price Index) is less than 3 percent while weightage of food is about 50 percent. Even if you consider second-round effects (of the fuel price hike), the weightage is about 5 percent. So if you do an analysis, it becomes very clear that the contribution is not that large."

Subramanian also said rising crude oil prices is reflecting in overall inflation.
In June, CPI-based inflation rose 6.26 percent, slightly lower than 6.30 percent in May.

Food inflation rose slightly to 5.15 percent in June, while inflation in the 'fuel and light' sub-group increased to 12.7 percent.