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Capital funding for road construction at Rs 33,048 cr, highest in a decade

The Budget also sounded out a proposal of issuing tax-free bonds to fund roads, railways and irrigation projects

Arijit Paladhi  |  3 March 

The highways sector received the highest support in this Budget. While the budgetary support for 2014-15 was Rs 28,881 crore, it has jumped by 50 per cent in 2015-16 to Rs 42,912 crore. However, the fine print tells a better story of a 109 per cent jump in allocation for capital expenses.

Plan expenditure constitutes of two avenues of allocation — revenue and capital. While the former entails expenses used up within the same financial year, the latter is concerned with development of assets with productive value much beyond the current financial year. In the context of the road ministry, the revenue expenditure would involve paying salaries of employees and administrative costs. Capital expenditure, on the other hand, would mean construction of roads and highways, which are essentially long-term assets for the economy.

On that front, this Budget saw a massive 109 per cent jump in the capital allocation, the highest in recent times. In the previous decade, only the last year of the United Progressive Alliance-II government 2013-14 had seen a jump of over 50 per cent. “The Infrastructure boosters of public expenditure, national infrastructure fund, tax-free infrastructure bonds and resetting public-private projects will do well to help spur the sector back on to the growth path,” said Vinayak Chatterjee, chairman, Feedback Infra Private Limited.

Union Finance Minister Arun Jaitley’s Budget speech announced an increase in road cess on petrol and high-speed diesel, with the hike going from Rs 2 a litre to Rs 6 a litre. A mop up of Rs 26,124 crore is expected in 2015-16 from the increase. That implies a 57 per cent increase from the revised estimate of Rs 16,628 crore in 2014-15.

A large chunk of the increased outlay for comes from the Central Road Fund (CRF), which is where the road cess is accumulated. The CRF is a separate revenue stream dedicated to the development and maintenance of rural and state roads, and rail bridges. A total of 3,038 km, against a target of 6,300 km, has been constructed till January 31, 2015, according to a government press release.

The Budget also sounded out a proposal of issuing tax-free bonds to fund roads, railways and irrigation projects. Tax-free bonds, issued by the state, pay a fixed interest rate and have a long-term maturity period. Used to finance the state’s capital expenditure plans, the interest amount accrued on them are tax-free, which incentivises lending to the state.

First Published: Wed, March 04 2015. 00:43 IST