CAG criticises Maharashtra for continuation of Mumbai fuel cess

Notes excess cess burden financially unjustified, tells govt to discontinue it

The comptroller and auditor general (CAG) of India has rapped the Maharashtra government for the continuation of collection of one per cent cess on petrol and three per cent on diesel in Mumbai and adjoining towns despite the recovery of cost of construction of 37 flyovers in Greater Mumbai in November 2010 with the securitised amount of Rs 2,100 crore. CAG has observed that the excess cess burden on the public was therefore financially not justified.

CAG's scathing remarks in its report for the year ended March 31, 2015, come at a time when the chorus is rising for the exempting small vehicles from toll collection from five Mumbai entry points. At present, the vehicles entering and exiting Mumbai pay both toll and fuel cess.

CAG referred to the construction of 37 flyovers by the state-run Maharashtra State Road Development Corporation (MSRDC) at the total cost of Rs 1,065.25 crore during September 1997 and August 2002 on  build operate transfer (BOT) basis. The state government subsequently decided the cost will be recovered through toll, advertising and fuel cess on sale of petrol and diesel in Mumbai, Thane and Navi Mumbai municipal corporation areas. The Mumbai Entry Points (MEP), which were awarded toll collection contract from 1999-2000 onwards, had already collected Rs 1,058.66 crore up to October 2010. Incidentally, MEP also received fuel cess from the state government.

Thereafter, MEP was awarded contract for securitisation of toll rights for a period of 16 years from November 20, 2010, to November 2026, for an upfront receipt of Rs 2,100 crore. ''We observed that taking into account the internal rate of return  (IRR) at 16.12 per cent for the project cost as approved by the Maharashtra government on MEP's proposals, the entire project cost stood recovered in November 2010 itself, with the securitised amount of Rs 2,100 crore and cess received, yet MEP continues to receive the fuel cost from Maharashtra government. The excess cess burden of the public was therefore financially not justified,'' CAG said.

CAG has re-iterated discontinuation of the fuel cess  through its communication in December 2015. However, the government's reply was still awaited.