Govt may hike fuel cess by Re 1 to fund highways

Consumers might have to shell out a higher cess on auto fuels if the government goes ahead with a proposal to step up funding for highways. The roads and surface transport ministry has suggested a Re 1 hike in auto fuel cess. According to highly-placed government sources, the actual hike may be 50 paise per litre, though the final call will be taken by the Prime Minister���s Office, the finance ministry and the Planning Commission.

An increase of 50 paise per litre would fetch the government an additional Rs 5,000 crore. The government collected nearly Rs 30,000 crore through the cess during 2008-09 .

The suggestion is likely to be discussed in the run-up to the Budget, said the sources, who did not want to be identified. The suggestion to hike the cess is with the long-term needs of the sector in mind, they added. Currently , there is no dearth of funds for the sector primarily because implementation of projects is moving at a snail���s pace. Once the pace of road development is stepped up, as indicated by the government, the need for funds would outpace the collection from the cess. Hence, the plan to hike the cess now.

The slack pace of development of roads and highways has been one of the weak links in infrastructure development. The new minister in charge of roads and highways, Kamal Nath, is looking at an ambitious plan to build at least 20 km of highways every day. Several rounds of discussions with officials of the ministry and the National Highways Authority of India have taken place and proposals for the 2009-10 Budget would be finalised soon.