Road Sector unlikely to be affected by expansion of allocations under Central Road Fund to other subheads
With the recent hike proposed towards the sub-sectors under the Central Road Fund (CRF), allocations to roads and highways would remain unaffected, even as the allotment would now depend on priority of the infrastructure projects. Experts believe, given the high fund requirements for the ambitious new road development programmes, surplus for other sectors is expected to remain minimal
The Finance Bill, 2018, has significantly expanded the scope of deployment of the Central Roads Fund, starting with national waterways in June 2017 and by adding other infrastructure sub-sectors (as per the revised harmonised master list of infrastructure sub-sectors as of April 2016). So, the CRF was renamed as the Central Road and Infrastructure Fund (CRIF). Read more
The allocations under the revised harmonised master list of Infrastructure sub-sectors have gone up for waterways by 3% as an additional sub-sector, while it has been reduced by 2% from the national highways segment and by 1% from the Rural Roads sub-sector after July 2017.
Shubham Jain, VP and Sector Head, Corporate Ratings at ICRA said, “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 lakh crore (34%) out of the total Rs 6.92 lakh crore during FY19-FY22. The annual requirement over four years from CRIF would be around Rs 59,256 crore – implying 52% of the CRIF projected for FY19.
It should be understood here, that 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 set to be concluded by 2019, the government intends to deploy the CRF in other infrastructure sub-sectors. Towards the end of 2017 road projects worth Rs 7 lakh crore were approved under the Bharatmala programme to build 83,677-km road network in the country by 2022. This is over three times the total roads built under the NHDP initiated by Atal Bihari Vajpayee government in 1998 – 25,000 km.
With this and other developments within the sector in mind, Finance Minister Arun Jaitley, in his Budget speech on February 1, raised the allocation towards the construction of roads and highways from budgetary and extra-budgetary resources to Rs 5.97 lakh crore from an earlier estimate of Rs 4.94 lakh crore for the fiscal year 2017-18. The government has also proposed to levy 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 FY19.
“But 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% earmarked for the national highways itself would not be sufficient to fund the ambitious programme,” Mukherjee said.
The funding requirement for rural roads through the CRIF may be lower than the current levels which could be used for other purposes. Another significant inclusion in the bill 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 the Finance Minister, 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 sub-sectors like affordable housing, healthcare infrastructure.
- TradeBriefs Bureau -