Centre, states need to c ut fuel tax: RBI

The Centre and state governments need to reduce taxes on petrol and diesel in a coordinated way to check the impact of rising auto fuel prices on inflation, Reserve Bank of India Governor Shaktikanta Das said.

"There is a need for coordinated action between the

Centre and states because there are indirect taxes levied by both," Das said, addressing the 185th Foundation Day of Bombay Chamber of Commerce and Industry.

"There is need for coordinated and calibrated reduction of taxes," Das said in reply to a question on the impact of rising auto fuel prices on inflation.

Das expressed optimism that both the Centre and the states will take "positive decision" on petrol and diesel taxes. Retail price of petrol is currently at 97.34 rupees per ltr in Mumbai, up 30.1% on year.

About 60% of the retail price of petrol and diesel is excise duty levied by the Centre and value added taxes imposed by state governments.

The RBI governor said rise in diesel and petrol prices impacted inflation by pushing up costs of manufacturing and transportation.

Earlier this month, the Monetary Policy Committee of the RBI said reduction of taxes on petroleum products by both the Centre and the states could ease cost push pressures.

Though India's headline inflation rate, based on CPI, fell to a 16-month low of 4.06% in January, the core inflation remained sticky at 5.7%.