Petroleum fuel falls from a hand pump at a gas station operated by Bashneft PAO in Ufa, Russia. (Photographer: Andrey Rudakov/Bloomberg)

Budget 2019: Fuel Price Hike To Have Very Marginal Impact On Inflation, Says Finance Secretary

Finance Secretary Subhash Chandra Garg said the increased petrol and diesel prices after the duty hike will have "very marginal impact" on inflation and any worry on that front is immaterial.

He also said the government expects Rs 90,000 crore from the Reserve Bank of India as dividend during the current fiscal.

Post the rise in fuel taxes announced by the government in the Budget for 2019-20, petrol and diesel prices rose by at least Rs 2.4 and Rs 2.36 per litre respectively across metro cities.

The prices increased after Finance Minister Nirmala Sitharaman raised excise duty and road and infrastructure cess by Rs 2 per litre on both the fuels.

“Any increase in tax does have some implications for the inflation but we are currently at such a low rate, it will have no impact or very marginal impact as far inflation is concerned,” Garg told PTI in an interview.

"Inflation is well below the most comfortable level of 4 per cent so I don't think that worry is material," he added.

On the RBI dividend, he said the government expects 32 percent higher increase in surplus transfer at Rs 90,000 crore from the central bank.

This does not include excess capital reserves to be transferred by the RBI to the government after finalisation of the Bimal Jalan Committee report.

Also read: Budget 2019: Government, RBI Step In With Measures To Boost Liquidity For NBFCs

The central bank transferred Rs 68,000 crore to the government including Rs 28,000 crore as interim dividend.

This was the highest receipt from the RBI in a single financial year, exceeding the Rs 65,896 crore received in 2015-16 and Rs 40,659 crore in 2017-18.

The RBI in December last year constituted a high-level panel led by former RBI governor Bimal Jalan to decide the appropriate capital reserves that the central bank should maintain.

Also read: BQ Exclusive: RBI Panel Estimated ‘Transferable Surplus’ At Just About Rs 8,000 Crore

The government and the RBI under its previous governor Urjit Patel had been at loggerheads over the Rs 9.6 lakh crore surplus capital with the central bank.

The Finance Ministry was of the view that the buffer of 28 percent of gross assets maintained by the central bank is well above the global norm of around 14 percent. Following this, the RBI board in its meeting on Nov. 19, 2018, decided to constitute a panel to examine Economic Capital Framework.

Also read: Budget 2019: Why Former RBI Governor Rangarajan Thinks Sovereign Foreign Currency Borrowing Is A Bad Idea

Bloomberg Quint

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