RBI favours price fine tuning to curb fuel demand

Reserve Bank of India (RBI) has favoured the fine tuning of fuel prices considering the need for reducing demand of fossil fuel. RBI has opined that the consumption of petroleum products remains strong distorting price signals and preventing from acting normal on country’s consumption pattern. The central bank has also pointed out that albeit considerable reduction of crude prices in the international market, the rupee depreciation of about 20% against dollar this year ,has taken off its impact on wholesale prices.

The central bank emphasized that even at the current lower level of global crude oil prices, significant under-recoveries exist in respect of administered petroleum product prices. Though, oil marketing companies are free to decide on prices, the government continued regulation of prices of diesel, LPG and kerosene. Further, this subsidy burden on the government will cause a crowding out effect on public investment at the time of investment revival.