CEA Subramanian hints that govt is unlikely to cut fuel taxes

In June, CPI-based inflation rose 6.26 percent, slightly lower than 6.30 percent in May.

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.

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.

"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."