Finance minister Arun Jaitley has quietly divested the ministry of road transport and highways (MoRTH) of its 17-year near-monopoly on the Central Road Fund (CRF) — created out of the proceeds from the so-called road cess on petrol and diesel — and acquired the power to disburse these funds to a whole range of other infrastructure sectors, including electricity, gas pipelines, agricultural cold chains, affordable housing, communication and water & sanitation. When the amendments to the Central Road Fund Act, 2000, proposed in last week’s Union Budget take effect, the (now-renamed) Central Road and Infrastructure Fund (CRIF) could be used to finance even hospitals, medical colleges and education institutions.
A committee headed by the finance minister will decide which project should get how much. The CRF — the flows to which are estimated to be over Rs 83,000 crore in 2018-19 — has been the mainstay of public funding of highway projects in the country since it was set up by the Vajpayee government, with the objective of finding the resources for the National Highway Development Programme. MoRTH has invariably laid hands on bulk of the fund and enjoyed the discretion to allocate the monies to various highway projects implemented by itself and the NHAI. The ministry also allocates the funds to states and Union Territories for roads and for inter-state connectivity projects. Of course, relatively smaller amounts from the CRF are now being transferred to the ministry of rural development (for rural roads) and the railways (to build over-bridges).
But the changes proposed in the Budget have the potential to usurp MoRTH of its administrative leadership in the fund’s use. Although in recent years, highway projects have increased reliance on extra budgetary sources other than CRF and borrowings, given the continued focus on engineering-procurement-construction contracts, which are fully government-funded and the substantial share (40%) of the government in the “hybrid-annuity projects”, loss of control over the “road fund” could affect MoRTH’s plans.
According to the Finance Bill 2018, “The Central Road and Infrastructure Fund (will be) for development and maintenance of National Highways, railway projects, improvement of safety in railways, State and rural roads and other infrastructure…” It added: “The share of the fund to be appropriated to each infrastructure projects shall be finalised by a committee, constituted by the Central government by notification published in the official gazette, headed by the finance minister, depending on the priorities of the project.” It has also listed the categories of projects and infrastructure sub-sectors which could be funded from the CRIF.
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In keeping with a plan to extend the use of CRF to other priority areas of transportation, Parliament approved amendments to the relevant Act in December last year and sanctioned 2.5% of the CRF for the development of the “national waterways”. According to the MoRTH’s 2016-17 annual report, the ministry had allocated Rs 38,209 crore under the CRF for 2016-17. Of this, Rs 7,175 crore was in the form of a grant to the states and UTs for state roads, Rs 805 crore, also as grant, to states & UTs for roads of inter-state connectivity and economic importance, and the remaining Rs 30,229 crore to National Highways. The funds for development of state roads under the CRF scheme are allocated to the states/UTs on the basis of 30% weightage to fuel consumption and 70% weightage to the geographical area. According to the procedure for accruing funds to the CRF and spending from the fund, the revenue collected through the road cess is first credited to the Consolidated Fund of India and later, after adjusting for the cost of tax collection, the monies go the CRF.
The MoRTH has recently said that between FY18 and FY19, BharatMala project and the existing highway schemes would be funded through Rs 2.37 lakh crore from the CRF, Rs 59,973 crore as budgetary support, Rs 34,000 crore raised through monetisation of operational projects through the toll-operate-transfer route, and Rs 46,048 crore collected as toll-permanent bridge fee fund by the NHAI.