Creation Of Highway Fund May Be Delayed

Creation of funds for highway development projects from oil cess is likely to be delayed and may require certain constitutional amendments.

The surface transport ministry had sought such a corpus outside the Consolidated fund of India dedicated to the development, operation and maintenance of highways. Official sources said the Constitution does not permit the creation of such a fund. All levies will, therefore, have to be credited either to the Consolidated Fund or to the public account. Drawing funds from the Consolidated Fund cannot be done without the approval of Parliament. Funds credited to the public account cannot be drawn freely by the ministries for the development or maintenance of projects without the approval of the finance ministry.

The surface transport ministry argues that crediting such funds to the public account does not entail it to be utilised exclusively for highway development. In fact, what was sought was the creation a fund on the lines of the central road fund (CRF) which is administered directly by the surface transport ministry through a cess of 3.5 paise per litre of petrol/diesel.

The sources said the creation of such a fund had been sought to eliminate project operating risks and to meet project debt service payments in the event of a shortfall in cash flows.

The fund was also intended to be a guarantee corpus of NHAI. Besides, the ministry wanted a corpus for funding projects on a shadow tolling basis or through annuity-based methods as an alternative to direct tolling.

Shadow tolling implies that project operators will be paid on the basis of the actual traffic flow on the road, though there will not be any direct toll levies on the traffic. In the case of annuity-based payments, the operators will have a fixed income flow during the concession period. The National Highways Authority has proposed these two methods of funding for projects which are not viable on a direct tolling basis. Essentially this method is a deferred payment for project operators.

As a result of this legal hitch, the Rs 790 crore collected through a cess on petrol will be credited into the public account till the creation of a highway development fund. Toll collected from the Jaipur-Kotputli sector is also currently credited into the public account and not into any separate reserve funds dedicated for highway development. About Rs 30 crore is collected from this corridor.

Consequently, projects to be taken up on shadow tolling or annuity-based methods are also expected to be delayed, the sources said. The project payments from the public account will have to be cleared by the finance ministry, the sources said.