Road Ahead: Fuel Cess may haunt you till '30

NEW DELHI: Even as fuel prices are skyrocketing, there seems to be no respite for consumers from the cess on petrol and diesel for at least two more decades. The government is contemplating to continue with the Rs 2/litre cess on fuel up to ’29-30.

A Cabinet note prepared for the road sector development has said that the cess should continue till ’29-30 to repay borrowings. The cess on petrol and diesel was introduced in June 1998. Initially it was charged at the rate of Rs 1 per litre. The cess later enhanced to Rs 1.5/litre, and in ’05-06 it was further increased to Rs 2/litre.

According to the Budget estimate of ’06-07, the government intends to collect Rs 12,530 crore as cess on petrol and diesel. In FY06, the cess collection was Rs 12,090 crore. The collections from the cess go mainly towards financing highway projects and repaying loans. Loans raised for road sector projects alone was over Rs 6,018 crore in ’05-06, necessitating the move to extend the application period of the cess.

The government has already spent Rs 2,29,019 crore on National Highways Development Projects (NHDP) and it needs an additional Rs 41,210 crore to implement NHDP-V, which includes six-laning of existing high ways and constructing new road links. Collections from cess is thus considered an important vehicle for financing road projects.

Meanwhile, the government is considering to approve the financing of highways and new stretches of road links under NHDP-V. According to a Cabinet note, the total investment in this phase is estimated to be Rs 41,210 crore with the
government’s contribution being Rs 5,518 crore.

It has been agreed that the viability gap funding to the extent of 10% would be provided to these projects under the concession agreement.

NHDP-V involves six laning of about 6,500-km of national highways, including 5,700 km of Golden Quadrilateral (GQ) under build-operate-transfer and 825 km of road links outside the GQ.

The new stretches to be taken up under NHDP-V include Panipat-Jalandhar link of 30 km, Delhi-Hapur-Moradabad link of 170 Km, Indore Devas of 55 km, Samakhyali-Gandhidham 56 km, Agra-Gwalior 85 km, Chandikhole-Paradip
77 km and Ludhiana-Chandigarh 82 km.