Most Seeks Re 1 Cess On Diesel For Highway Fund

The surface transport ministry is seeking a one rupee cess per litre of diesel to enlarge the corpus of the highway development fund.

The one rupee cess on petrol, introduced in the last budget, rakes in about Rs 790 crore annually for meeting development and maintenance expenditure of highways.

Official sources said the proposed cess on diesel would take the corpus to about Rs 3,000 crore per annum and completely eliminate the reliance on budgetary funding.

The Rs 790 crore corpus is in addition to the central road fund, which is levied at a rate of 3.5 paise per litre of petrol/diesel. However, more than half of the central road fund goes to the states for meeting the maintenance and development requirements of state highways.

The accretion to this fund is about Rs 600 crore of which only about Rs 300 crore is available for national highways.

Consequently the total funds available to the surface transport ministry for highway development/ maintenance is about Rs 1,100 crore.

The sources said the ministry was for modelling the highway fund on the Federal Highway Trust Fund in the US where the levy on both diesel and petrol is earmarked for the trust fund for meeting maintenance and development expenditure.

The sources said sales charts of the automobile sector indicated a trend towards dieselisation of both commercial and personal vehicles.

Currently, about 90 per cent of the consumption of petrol is by government including the defence services.

Accordingly they added that the bulk of the accretion to the cess was borne by the government, with vehicle operators bearing only 10 per cent of the load for the creation of this kind of dedicated fund leading to an increase in the revenue expenditure of the government.

Besides if the government itself begins shifting towards diesel vehicles, there could be shortfalls in the accretion to the funds.

Besides, the ministry has sought earmarking of the funds raised through such levies for highway development outside the consolidated fund and the public account of the country. This would imply dedicating the funds for highways development, the sources said.

Such earmarking, the sources said, would improve the bankability of road projects since financiers were still uncomfortable with the existing method of direct tolling of large projects. Creating the corpus will enable the ministry to create projects either through an annuity based payments for private financing of road projects or through a method of shadow pricing for some of the proposed four-laning projects.