Hoping to benefit from high crude prices, the road transport and highways ministry has proposed that road cess be levied as a percentage of the price of petrol and high-speed diesel (HSD) sold in the country, rather than as a fixed impost per litre of the fuels as at present. The ministry, which oversees public-private partnership projects in the road sector, told the Planning Commission that since budgetary outlay for road building is likely to shrink due to fiscal stress, an ad valorem cess would help the ministry meet its ends.
At present, cess of R2 per litre is imposed on petrol and HSD and so, the collection depends on the quantity sold and is immune to price fluctuations.
The road ministry?s share from the cess revenue (which goes into the Central Road Fund) stood at R10,680 crore in 2010-11 and it is expected to marginally rise to R11,910 crore this fiscal. The total plan budget of the ministry is R22,248 crore, which means that the finance ministry has a discretion over R10,338 crore, over 46% of the budget.
The road ministry wants to increase cess collection as it has planned a 22.67% hike in expenditure (investment) on road construction and maintenance in the next five years. Total investments (public and private) in road sector during
12th Five Year Plan is proposed at R4,83,323 crore as against R3,93,973 crore in the current Plan ending March 2012.
?We want to benefit from buoyant crude oil in the international market that has started reflecting in prices of petrol and diesel within the country. It would be a good move to impose cess on an ad valorem basis instead of a fixed amount per litre,? road transport and highway secretary AK Upadhyay told FE. However, the ministry has not suggested any rate at which cess can be imposed, the secretary said, adding that it ?has to be decided by Planning Commission and the finance ministry.?
A Planning Commission official said the panel is weighing the impact of such a charge on consumers. ?With the government weakening its grip on petrol and diesel prices, any ad valorem cess could have a significant impact on consumers of these fuels. We have to carry out a cost-benefit analysis,? he said.
During the current Plan period, the ministry has sourced Rs 38,771 crore from CRF for construction and maintenance of national highways. The ministry sees a gap of Rs 54,898 crore in funding of national highways and wants to bridge it with the proposed move. ?The increase in CRF fund due to ad valorem cess will be set aside only for national highways,? Upadhyay said.
Of the total investment in next five years, road ministry expects the private sector to contribute Rs 1,78,253 crore, toll revenue Rs 28,797 crore and multilateral agencies Rs 10,980 crore while budgetary support ? both gross and extra budgetary support ? will be Rs 1,20,849 crore. An additional budgetary support of Rs 89,546 crore will be required to finance road programme for north-east region and other special packages.
