New Delhi/Mumbai, April 17: In a synchronised assault on price rise, the government and Reserve Bank on Thursday unleashed more measures, including steps to temper demand for loans, to cool inflation which incidentally eased to 7.14 per cent.
RBI announced raising CRR, the amount of funds banks are required to park with the apex bank, by half-a-per cent to eight per cent to suck out Rs 18,500 crore excess liquidity from the banking system.
While the move is expected to temper demand for loans by way of high lending rates, the government is also understood to have finalised imposition of 10 per cent duty on steel exports and 15 per cent ad-valorem duty on shipping iron ore abroad.
Steel prices, which have increased by up to 49 per cent in the last 12 months, have contributed significantly to high inflation, which has fallen marginally to 7.14 per cent for the week ended April 5 from 7.41 per cent as on March 29.
Official sources also said that the government may provide one litre of edible oil every month to the poor through the public distribution system at a discount of Rs 15 to insulate them from the price rise.
"Year-on-year wholesale price index-based inflation, which was 3.83 per cent on January 12, 2008 (at the time of announcement of RBI's third quarterly review of credit policy), increased to 7.41 per cent on march 29 and remained at 7.14 per cent as on April 5 and its overall impact on inflation expectations requires to be monitored and moderated," the Central Bank said in a release.
Official sources said that an inter-ministerial group constituted to suggest measures for containing steel prices has finalised its report and it is expected to be submitted to Prime Minister Manmohan Singh shortly.
Finance Minister P Chidambaram is believed to have approved the report.
In the report, the ministries have broadly agreed on imposing a duty of 10 per cent on export of steel, reduction of excise duty to 8 per cent from the current 14 per cent, abolishing import duty on scrap and metcoke prices and doing away with the countervailing duty.
The significant part of the recommendations is to impose a 15 per cent ad valorem duty on iron ore export.
Once the Prime Minister goes through the report, the government would convene a meeting of the Cabinet Committee on Prices (CCP) to take stock of the price situation in the country.
The last time the CCP met on March 31, it had decided to abolish import duty on crude form of edible oils, and slash duty to 7.5 per cent on refined edible oil, besides ban export of non-basmati rice.
Agriculture Minister Sharad Pawar had yesterday announced a Rs 15 per litre subsidy on edible oil to be sold through PDS, besides a decision to import one million tons of cooking medium to improve the supply situation as part of efforts to fight inflation.
The government has repeatedly described inflation as an "iniquitous tax" on the poor and has said it even was willing to forego revenue to contain prices.
Bureau Report
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