With the recent hike proposed towards the Central Road Fund Act, 2000, credit-rating body ICRA noted that fund allocation to this sector would remain unaffected, adding that allocations, however, would now depend on priority of the infrastructure projects.
Given the high fund requirements for the ambitious new road development programme, ICRA said the surplus for other sectors is expected to remain minimal.
With the remaining portion of the National Highway Development Programme (NHDP) getting subsumed into the new road-development programme (83,000 km including Bharatmala- Phase-I) and a significant portion of the Pradhan Mantri Gram Sadak Yojana (PMGSY) set to be concluded by 2019, the government intends to deploy the central road fund (CRF) in other infrastructure sub-sectors.
Starting with national waterways in June 2017, the scope of deployment of the CRF has been significantly expanded in the Finance Bill, 2018, by adding other infrastructure sub-sectors. Therefore, the CRF was renamed as the Central Road and Infrastructure Fund (CRIF).
"While the intent of the scope expansion is positive, the deployable surplus in the newly added infrastructure sub-sectors could be paltry. For the new highway development programme involving 83,000 km, the erstwhile CRF was estimated to fund Rs. 2,37,024 crore (34 percent) out of the total Rs. 6,92,324 crore during FY2019-FY2022. The annual requirement (assuming equal distribution over four years) from CRIF would be around Rs. 59,256 crore - implying 52 percent of the CRIF projected for FY2019 (please refer to the chart on CRIF receipts)," said Shubham Jain, Vice-President and Sector Head, Corporate Ratings, ICRA.
"In the event of crude prices moving up, there could be limited head room for the Government to further increase the road and infrastructure cess. In such a scenario, the existing 39 percent earmarked for the national highways itself would not be sufficient to fund the ambitious programme," he added.
Another significant inclusion in the bill, ICRA noted, is doing away with fixed apportionment of the CRIF. The apportionment of fund to each of the infrastructure sub-sectors would be finalised by a committee headed by Finance Minister Arun Jaitley, depending on the priorities of the project. This would enable the Government to deploy the unutilised portion of funds earmarked for rural roads in National Highways and other high priority infrastructure subsectors like affordable housing and healthcare infrastructure.
On a related note, the Union Budget 2018-19 proposed to levy of a road and infrastructure cess of Rs. 8 per litre on petrol and high-speed diesel oil while abolishing the additional excise duty of Rs. 6 per litre. Further, the basic excise duty on both branded and unbranded petrol and diesel has been slashed by Rs. 2 per litre so that it would have no impact on the end users of fuel.
This road and infrastructure cess, estimated at Rs.1, 13,000 crore, would flow into the CRIF in FY2019.
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