Nod to states for borrowing from FIs for rural roads

States could be allowed to borrow funds from financial institutions like LIC and Nabard against their projected share of the accruals under fuel surcharge.

The rural development ministry is moving a Cabinet note to amend the Central Road Fund (CRF) Act, 2000, to allow such loans for development and maintenance of rural roads.

"We found that a lot of money accruing to our ministry and state governments as our share of the petrol surcharge , takes a long time in reaching us. This holds up the financing of various projects," Union Rural Development Minister Raghuvansh Prasad Singh told Business Standard.

An amendment to the CRF Act, has, therefore been proposed to make it posible for the rural development ministry, as well as state governments, to avail loans, using projected income from the surcharge as collateral. The number of years of income against which loans can be issued can be up to 10 years.

"Already, the finance ministry owes the rural development ministry nearly Rs 2,350 crore in payments on the surcharge. In this scenario, it will be a relief to have funds to pay for various programmes rather than holding them up," he added. This amount is the ministry's share in the additional 50 paise per litre diesel cess imposed since 2003-04.

At present, the Act allows borrowing from financial institutions against future CRF accruals for upgradation of the National Highways, but not for the rural roads.

The Planning Commission, in its mid-term review, noted that the progress in the Pradhan Mantri Gram Sadak Yojana had not gained momentum due to its total dependence on bugdgetary support. The commission had recommended that CRF should be leveraged for borrowing in the case of rural roads too.

The minister has said that the Pradhan Mantri Gram Sadak Yojana, for providing basic all-weather road connectivity to rural habitation, would not meet the deadline of 2007.

While the minister has extended the date of completion by five years to 2011-12, he has estimated a shortfall of Rs 93,000 crore for the project. The minister is therefore exploring ways to generate additional resources, including pushing for amendment to the Act, to make borrowing easier.

Other steps include requesting the finance ministry for Rs 1,500 crore support, in addition to the budgetary allocation of Rs 2,148 crore for the fiscal.