Hike in cess on diesel, petrol sought

Ministry of Road Transport and Highways wants funds to build, maintain NHs

The prices of petrol and diesel may go up if the government accepts the proposal of the Ministry of Road Transport and Highways to increase cess on petroleum products to raise more funds to build and maintain national highways.

“Increase the cess on petrol and High Speed Diesel (HSD) suitably from present level of Rs 2 per litre to mobilise funds for national highways,” a  Planning Commission working group for the 12th Five Year Plan (2012-2017) has recommended. It also added that to ensure collection of more funds, levy of cess on petroleum products as per the provisions of the Central Road Fund (CRF) Act, on ad-valorem basis in place of the current policy of charging it at Rs 2 per rate per litre was required.

However, the increase in oil prices is always a political decision and the Trinamool Congress, a key ally of the government, has successfully forced the government more than once not to go for a hike.

As per the ministry projection, it required Rs 4.80 lakh crore for development and maintenance of highways and expressways in 12th Five Year Plan period and during the period the ministry was expected to raise Rs 54,898 crore through cess collection as per the existing rates. “If the imposition of cess is increased or if it is collected advolurum (based the price of petroleum products), the government can garner more money,” sources in the Ministry told Deccan Herald.

The report also suggested for a substantial hike in the investment in the road sector for broader objective of achieving socio-economic development of the country and maintain targeted growth trajectory.

In the current Five Year Plan which ends on March 31st 2012, the highway ministry will spend around Rs 1.52 lakh crore including Rs 38,700 crore collected from cess.

The cess on fuel is being levied since 2000-01 under the Central Road Fund Act, 2000, according to which 50 per cent of the cess on HSD and all the money from the cess on petrol was to be spent on development and maintenance of national highways, construction of railway over-bridges or under-bridges and for development and maintenance of roads other than national highways or roads of economic importance. While the cess started as Rs 1 per litre on petrol and HSD oil in 2000-01, in 2003, it was increased to Rs 1.50 per litre and in 2005, it was raised by another 50 paise for the development of highways.

However, both the Centre and states have faced criticism for not utilising the funds collected through cess for road development. Even the Parliamentary Standing Committee also expressed its unhappiness over failure to use the funds properly.

It may be noted that a panel headed by former Delhi Metro chief E Sreedharan constituted by the Planning Commission recently had suggested a green surcharge of Rs 2 on every litre of petrol to discourage the public using private vehicles and raise funds to develop public transport like metro rail. However this proposal is still pending before the Commission.