Petrol, diesel excise duty hike to raise Rs 10,500 crore a year for highways

NEW DELHI: The decision to hike excise tax on petrol and diesel by Rs 2 per litre will come as a big boost to highway development in the country, which is moving at a snail's pace. The increase is expected to generate nearly Rs 10,500 crore annually at a time when highway development is being pushed mainly through government-funding mode.

At present, about Rs 12,000 crore comes annually for highway development from the total fuel cess collection.

A government release said that fresh decision has been taken "in order to fund the ambitious infrastructure development programme of the government, particularly the building of 15,000 km of roads, during current and next financial year". It added allocation of these resources to the road sector will also spur economic activity and employment generation arising from the road construction sector.

"However, retail price of petrol and diesel will remain unchanged all over India despite additional excise duty of Rs 2 per litre from midnight today (Friday)," oil mnister Dharmendra Pradhan tweeted. When the government hiked excise duty on the petrol and diesel last month, oil firms had decided to absorb the duty change. The government on December 2 raised excise duty on petrol by Rs 2.25 per litre and on diesel by Rs 1 a litre. Oil companies had revised fuel rates just a day before the hike and had decided to absorb the increase.

The need for additional fund flow for highway development was earlier mooted by road secretary, sources said and it was moved in the last couple of weeks. "This additional fund will mean our borrowing requirement for highway development programme will be less. If there was no such fund flow, we would have end up borrowing Rs 1.8 lakh crore in the next three-four years," said a ministry official.

TOI on December 23 had reported how the ministry had pushed for getting additional funds for the next two to three years to meet the growing need of finance since there is little hope of private investment in this sector in the near future. The ministry has targeted to award about 20,000 km of highways on government funding mode.