Our Bureau

New Delhi, Feb. 28

THE Government has decided to impose an additional cess of 50 paise per litre on both petrol and diesel to raise additional resources to finance the National Highways Development Project (NHDP). Accordingly, the cess on petrol and diesel has been increased from the current level of Rs 1.50 per litre to Rs 2 per litre.

As per the Finance Bill 2005, the proceeds from the additional 50 paise per litre cess on petrol and diesel will accrue entirely to the dedicated Central Road Fund (CRF) and will be earmarked exclusively for the development of national highways.

Since this would require an amendment to the existing Central Road Fund Act, 2000, Mr Chidambaram said that a suitable amendment is being proposed in this regard to change the allocation pattern which was finalised when the cess of Re 1 per litre on petrol and diesel was collected since June 2, 1998 and March 1, 1999 respectively for funding the highway development projects in the country.

Subsequently, the cess was raised by an additional 50 paise per litre on petrol and diesel and levied since April 1, 2003.

As per the formula set out in the CRF Act, 50 per cent of the Re 1 per litre cess collected on diesel would be allocated to the Ministry of Rural Development for the construction of rural roads. The balance 50 per cent of the diesel cess and the Re 1 per litre cess on petrol would be distributed in the ratio of 57.5 per cent for the development and maintenance of national highways, 12.5 per cent to the Railway Ministry for the construction of rail over-under bridges and 30 per cent to the States for the development of state roads.

With the Centre taking up more national highway development projects necessitating incremental funds through cess receipts, the Department of Road Transport & Highways has made out a case for adopting a different formula for distributing the additional cess of 50 paise per litre on petrol and diesel collected since April 1, 2003 other than the one spelt out by the CRF Act for allocating the Re 1 per litre cess each on petrol and diesel.

Accordingly, the Department of Road Transport & Highways has suggested that 50 per cent of the additional cess of 50 paise per litre on diesel be allocated exclusively for rural roads. The balance 50 per cent of the additional diesel cess and the entire additional cess of 50 paise per litre on petrol should be given to the Department of Road Transport & Highways to be utilised solely for the development of national highways.

With the cess on petrol and diesel raised by a further 50 paise per litre in the Budget to be utilised exclusively for the development of national highways, the allocation pattern amongst various stake holders is set to undergo a change.

(This article was published in the Business Line print edition dated March 1, 2005)
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