Financial Daily from THE HINDU group of publications
Sunday, May 21, 2006
Industry & Economy - Taxation
Panel favours splitting road cess revenues based on usage
A VIEW of the Chennai-Bangalore National Highway. S.S. Kumar
New Delhi , May 20
The core group formed on National Highway Development Programme (NHDP) financing, in Planning Commission has called for splitting the road cess revenues that accrue to National Highways Authority of India (NHAI) into two parts.
One part entails servicing the public private partnership (PPP) component; and the other, engineering procurement contract (EPC), operation and maintenance (O&M) and miscellaneous component.
A part of the road cess revenues from 2006-07 onwards may be earmarked and put under a separate budget head for PPP, to be used only for meeting the viability gap requirements of BOT (Toll) projects.
The Planning Commission would do the earmarking annually in consultation with the Road Transport and Highways Ministry, and the Planning Commission, it has said.
For meeting any gaps in funding, short-term or medium-term borrowings may be allowed provided they are under overall borrowing limits of NHAI.
The remaining cess revenues along with toll revenues and committed external aid may be used for funding O&M, land acquisition, feasibility studies, establishment cost, amongst others. One of the suggestions by the Group is that the annual borrowing limits of NHAI should be fixed in such a way that the annual debt service obligations would not exceed 50 per cent of its projected annual revenues.
The annual borrowing limits for NHAI should be fixed from year to year by the Finance Ministry in consultation with the Planning Commission, it has mooted.
The borrowing limits should also include annuity repayments, as nature of liabilities created by annuities is similar to that of borrowings and both constitute a charge on future cess revenues of NHAI, it has said.
"The borrowing limits of NHAI should be fixed to the extent that its annual debt service obligations did not exceed 50 per cent of its projected revenues," the committee has recommended.
It also noted that such borrowings should be allowed only for funding the grant element of PPP projects as that would maximise the leveraging effect.
The other view was imposition of such ad hoc borrowing limits on NHAI would become an impediment in programme implementation and therefore NHAI should be allowed to borrow to such limit as is necessary for time bound execution of the programme.
According to this view, in order to undertake the NHDP as envisaged the entire cess revenue up to 2029-30 could be committed for debt service.
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