No change in road cess formula

The Group of Ministers (GoM) on amendments to the Central Road Fund Act, 2000 has rejected the road transport and highway department's proposal to change the formula for division of the revenue collected through the additional cess of 50 paise on every litre of petrol and diesel.

The GoM, which met on Tuesday, recommended that the original formula be retained. The department had proposed that the entire mop-up through the additional cess be made available to the rural development ministry (for village roads) and the Centre (for national highways) instead of earmarking funds for the railway ministry and state governments.

This necessitated an amendment in the CRF Act and a proposal was placed before the Cabinet Committee on Economic Affairs. The Cabinet had referred the matter to the GoM headed by Defence Minister Pranab Mukherjee due to opposition from the railway ministry and state governments.

As per the CRF Act, 50 per cent of the diesel cess is earmarked for the rural development ministry for construction of rural roads. The entire Re 1 cess on petrol and the balance mop-up through the diesel cess is distributed in the ratio of 57.5 per cent for development and maintenance of national highways, 12.5 per cent to the railway ministry for construction rail overbridges and the remaining 20 per cent to states for state roads.

The proposal by the department of road transport and highways effectively meant that of the total proceeds from the additional cess (about Rs 2,600 crore annually), 50 per cent of the diesel cess and all of the petrol cess would be used for developing national highways.

Officials said the release of funds from the additional cess had been delayed since 2003 due to the lack of a formula for distribution.