Financial Daily from THE HINDU group of publications
Saturday, Mar 01, 2003
Industry & Economy
Logistics - Roadways
Want better roads? Pay 50 paise more for diesel, petrol
NEW DELHI, Feb. 28
THE public will have to pay more as fuel cess, apart from the toll fees for using highways in the country.
The Government has decided to impose an additional cess of 50 paise per litre each on diesel and petrol for funding road development in the country.
The decision announced by the Finance Minister, Mr Jaswant Singh, in his Budget makes light of the view that it is a harsh measure on the consumer already burdened by a Re 1 per litre cess on petrol and diesel introduced since September, 1998 and March 1999 respectively to fund the 13,000 km-long National Highways Development Project (NHDP). The existing cess collections top Rs 6,000 crore annually.
The Ministry of Road Transport and Highways and the National Highways Authority of India (NHAI) have been demanding the imposition of an additional cess to fund the North-South and East-West corridors which form part of NHDP-II.
Mr Singh announced that the additional 50 paise cess on petrol and diesel would fetch a further Rs 2,600 crore for funding the North-South and East-West corridors.
A portion of the additional cess on diesel would be made available for rural roads as well. This will be over and above the anticipated allocation of Rs 2,325 crore for 2003-04 from the existing cess collections for rural roads.
Out of the existing cess of Re 1 per litre each on petrol and diesel, 50 per cent of the diesel cess has been earmarked for financing rural roads under the Pradhan Mantri Gram Sadak Vikas Yojana.
The remaining 50 per cent of the diesel cess and the entire petrol cess has been apportioned in the ratio of 57.5 per cent for the development and maintenance of national highways, 30 per cent for the development and maintenance of State roads other than rural roads and 12.5 per cent for road bridges, under/over railway lines/safety work for unmanned railway crossings.
NHAI has been provided Rs 2,000 crore annually as its share of the 57.5 per cent of the existing diesel and petrol cess for financing NHDP Phase I. Since this money would be used mainly for funding the Golden Quadrilateral and some part of the cross-country corridors, NHAI had made out a case for levying an extra cess of 30 paise per litre on petrol or diesel to be utilised for the sole purpose of funding NHDP Part II comprising the corridors.
"The decision to levy an additional cess on petrol and diesel shows that the consumers are no longer wary of paying for the development of world-class roads in the country", a Ministry official said.
Besides, it showed the Government's courage to go ahead with the imposition of extra fuel cess despite being in election mode, he said.
Mr Singh also announced the development of 48 new road projects totalling over 10,000 km (a quarter of them will be made of cement concrete) at an estimated cost of Rs 40,000 crore.
These 48 projects are over and above the NHDP and have been identified for four-laning under the built, operate and transfer (BOT) scheme.
These projects will be financed through an innovative financing mechanism, the essence of which is to leverage public money through private sector partnership, wherever possible.
Under this mechanism, the release of public funds will be linked to specific and well- defined milestones in completion of the project, sharing of risks with the private promoters and financiers and no open-ended Government guarantees at any stage of the project.
In other words, the Government will provide a subsidy in the form of an annuity flow to meet only the shortfall between anticipated revenues from the project and loan repayment liabilities.
During 2003-04, about 3,000 km of roads constituting a third of these 48 projects would be taken up for four-laning, Mr Singh said.
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