Road and infra cess on petrol, diesel to add over Rs 1 lakh cr in central government’s coffers

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February 14, 2018 7:30 PM

According to ICRA, the road and infrastructure cess on petrol and diesel prices, proposed in the Finance Bill 2018, estimated at Rs 1,13,000 crore, would flow into Central Road and Infrastructure Fund (CIRF).

Road cess on petrol, diesel to add over Rs 1 lakh crore in central government’s coffers (Image: Reuters)

In the Budget 2018, Finance Minister Arun Jaitley cut excised duty on petrol and diesel by Rs 2 per litre and additional excise duty by Rs 6 per litre, but it still did not bring down the fuel prices in the country as it was balanced by the levy of a road and infrastructure cess of Rs 8 per litre.

Later, Arun Jaitley explained it was done ensure that more funds flow into central government’s coffers as it was taking a hit post the implementation of the GST. The step was taken as 40% of total excise duty is devolved to states, while cess is a specific duty collected entirely by the central government for a specific purpose.

According to ICRA, this road and infrastructure cess, estimated at Rs 1,13,000 crore, would flow into Central Road and Infrastructure Fund (CIRF). Explaining further Shubham Jain, Vice-President, ICRA Corporate Ratings said that in the event of crude prices moving up, there could be limited headroom for the government to further increase the road and infrastructure cess, leading to insufficient funds for national highways.

While in the Budget 2018, the government allocated a record-high fund of Rs 5.97 lakh crore for the development of infrastructure in the country, it was the Railways that became a clear winner, while roads took a backseat. While the hike in Railway development was 22%, for roads and highways it was just 8%.

ICRA expects the funding requirement for rural roads through the CRIF may be lower than the current levels which
could be used for other purposes. It said that the recent amendments to the Central Road Fund Act, 2000 makes it more flexible and allocations would now depend on priority of the infrastructure projects. However, given the high fund requirements for the ambitious new road development programme, the surplus for other sectors is expected to remain minimal.

A significant portion of the flagship Pradhan Mantri Gram Sadak Yojana (PMGSY) is set to be concluded by 2019, the government intends to deploy the central road fund (CRF) in other infrastructure sub-sectors, ICRA said. The scope of deployment of the CRF has been significantly expanded in the Finance Bill, 2018, by adding other infrastructure sub-sectors. So, the CRF was renamed as the Central Road and Infrastructure Fund (CRIF).

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