An Integrated Transport Policy has asked the government to quadruple the current level of annual investment for the transport sector, adopt several tax incentives to encourage private sector participation, and hike rail fares.
Giving a blue print for the policy stance of the government for the transport sector in the budget, the report prepared by a task force on the transport sector has said, "Broad estimates of investment requirement till 2010 indicate that it will be necessary to increase annual investment levels to three to four times the present level in real terms."
It says since there is a shortage of resources with the government, the bulk of the effort to meet the additional investment requirement for all modes of transport and infrastructure including rail, road, civil aviation and ports has to come through internal generation of resources.
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The current level of central plan outlay for transport sector in this fiscal is about Rs 22,500 crore.
The policy, which seeks to lay out a long-term perspective for the development of the sector, says attracting non-governmental funds will mean the pricing of transport and the levy of user charges have to be much more important than before.
Accordingly, "subsidies in transport will have to be limited to those areas where their retention on societal considerations is overwhelming," it says.
Advocating a fare hike in Railways, it says the department has reached the limit for cross subsidisation of fares within the different classes of passenger fares and also between passenger and freight fares.
It adds, "reluctance to impose passenger tariffs which cover costs only prevents the railways from mobilising the resources needed to modernise and upgrade the quality of their services" and has suggested phasing out subsidies both in respect of passenger and freight within the next three years.
The report has endorsed the recommendations of the Rakesh Mohan committee for the Railways to adopt a system of automatically indexing both passenger and freight fares to increases in fuel and wage costs.
According to the report there should be tax incentives for production of multi-axle vehicle which cause less wear and tear on roads.
To ensure extension of the concept of user charges the policy has recommended imposing a heavy vehicle tax as also parking and cordon charges.
In addition it has asked for phasing out sales tax and Octroi. The transport policy is however very sceptical about the possibility of large-scale funding of road construction projects by the private sector, except in high-traffic corridors, though, it has endorsed the concept of using government equity to leverage private sector investment.
It says, "the total scope for private sector investment in roads is likely to be limited." Instead, there is a much greater scope for private investment in bridges and bypasses.