This article is written by Mahima Sharma, pursuing LLB from Symbiosis Law School Pune. The author in this article has analyzed the Amendment of Central Road and Infrastructure Act, 2000 and the benefits it has contributed.
Table of Contents
Introduction
India’s infrastructure has been afflicted by challenges and problems by using out-of-date technologies until recently. There were poor and unreliable highways, bridges, docks, airports, and power sources. Until the market liberalization of the 1990s, infrastructure projects were usually funded from small public sector capital companies, which were marked by inadequate addition of capability and low-quality services. The economy expanded steadily in the 1990s – by 7 -9 percent a year – and development costs increased. As a consequence, infrastructure was seen as a big constraint to support rapid expansion and draw investment or industry in India. India has the largest road network in the world which helps in transportation of 60% of total goods produced and 85% of passenger traffic.
Seeing the growing demand for the development of infrastructure the Central Road Fund was adopted as cess.
The Central Road Road Fund (hereinafter CRF) is an anti-lapsable fund set up under Section 6 of the Central Road Fund Act, 2000 from cess/tax levied by the Central Government on the usage of Fuel and High-Speed Diesel, to build and strengthen National Highways, State Roads (especially those of considerable economic significance and providing metropolitan interconnection), rural infrastructure, rail under/over bridges, etc. However this CRF has been renamed as Central Road and Infrastructure Fund, 2000 by the government in the year 2018 so that fund could be used for further infrastructure projects as well unlike the CRF, as amended by the Government of India (Business Allocation) Rules of 1961, from July 2018, CRIF’s subject matter belongs to the Ministry of Finance.
About CRF
The Central Road Fund (CRF) has become a big income for the government for financing expensive road schemes over the past one and a half decades. The CRF which was introduced in 2000 is effectively a cess levied on fuel and diesel coupled with an excise tax.
The cess income has been accumulated to the distinctively formed CRF and since its launch, it has funded major road projects. CRF income has been invaluable in helping to complete the government’s long position-road projects – the NHDP and Pradhan Mantri Gram Sadak Yojana (hereinafter PMGSY). In fact, the rail network chosen for the rain was also improved utilizing the cess proceeds. Nevertheless, in the 2018 budget, the Government formed the Central Road and Infrastructure Fund which replaced the CRF and expanded its use. About Rs 8 is being collected to the CRIF per litre of diesel and petrol, as per recent records.
CRF to CRIF
The Budget 2018 modified the Central Road Fund Act, 2000, renaming it as the Central Road and Infrastructure Fund Act, 2000. The main purpose of the convention is to use CRIF ‘s road reinstatement proceeds to fund other infrastructure projects, including waterways, some railway infrastructure, and sometimes even social infrastructure, such as educational institutions, medical colleges.
The provision stipulates that road cess will first be allocated to India’s Consolidated Fund and then go to the CRIF after accounting for tax collection costs. According to the amendment, the proportion of each CRIF infrastructure area and projects shall be finalized by a Central Government Committee. The committee is chaired by the Minister of Finance.
The amendment broadened CRIF ‘s usage of road cess to a wider range of infrastructure areas and ventures. It is legitimate since most road ventures are heading to the final stage under the NHDP as well as the PMGSY. The remaining parts of the National Highway Development Program (NHDP) have been assimilated into the new road-development program (83,000 km comprising Bharatmala- Phase-I), and a significant portion of the Pradhan Mantri Gram Sadak Yojana is expected to be finished in the coming year. In this case, it is beneficial to use road cess to expand infrastructure areas.
Old Provision
Old provision used to state as follows:
‘Existing Central Road Fund controlled by Parliament’s Resolution adopted in 1988 for the construction and maintenance of National Highways and the enhancement of railway crossing protection and, for this reason, the levying and collection of Cess out of excise duties and customs duties on motor spirits widely referred to as petrol, high-speed diesel oil’.
The above provision was substituted by the Finance Act, 2018 as below:
‘Central Road and Infrastructure Fund for the development and maintenance of National Highways, Railway Schemes, Enhancement of Railway Safety, State and Rural Roads and Other Services, and for this reason, the levying and collection of excise duties and customs duties on motor spirits widely referred to as petrol and high-speed diesel oil’.
Key features of CRIF
- The ‘Road Cess’ is translated as ‘Road and Infrastructure Cess.’ The definition of road and infrastructure is specific in contrast with the previous concept of “road” as in the CRFA. Under the amended CRFA, the scope of activities that counts as “infrastructure” is far broader. The funds may be used for various reasons such as national highways, rural roads, inter-State links to other construction projects, etc.
- It should also be remembered that this fund’s size has increased over the years due to two reasons-
- More cars on the road (collected from diesel and petrol consumers by levying a surcharge on the volume of fuel they purchased),
- Increase in the levy amount.
- The windfall of revenue due to the above-mentioned reasons as well as the modification of the concept from ‘road fund’ to ‘road and infrastructure fund’ may propel the overall development of India and ensure the timely construction of world-class infrastructure within the country.
International recognition of CIRF
Route Funds are a widely recognized road construction and maintenance form of finance (for pulling financial gaps). The World Bank categorizes road funds into two: traditional road funds are generally considered first-generation funds. Those funds with commercial/professional control, budgetary stability, and negligible detrimental effect on the spending of the government (generally off-budget) are considered second-generation funds. CRIF is a second-generation fund in India. Many South Asian nations such as Nepal, Pakistan, Sri Lanka, and so on are considered to have implemented road funds in the style of either the first generation or second generation.
Sources of fund
- An Added Customs Duty (Import Tax) and an Added Excise Duty (Production Tax) are imposed and obtained as a cess on Motor Spirit, generally regarded as petrol, according to Section 103 and Section 111 of the Finance Act, 1998, respectively.
- Also, under Sections 116 and 133 of the Finance Act, 1998, an Added Customs Duty and an Added Excise duty is imposed and obtained as a cess on High-Speed Diesel Oil.
- Currently, Government is accumulating Additional Excise Duty (Road Cess) on Petrol and Diesel at 8.00 Rs per litre. Additionally, Education Cess @ 2% and higher Education Cess @ 1% (total 3%) also applies to excise duties and customs duties imposed on petroleum products.
Such duties shall be levied on petrol and high-speed diesel produced in or imported into India and — (a) taken away from a refinery or factory or outlet, or (b) transported to another person by the person who produces or imports such product.
Besides, no road and infrastructure taxes shall be imposed on the following items where appropriate excise duties & GST for the mixing of such products have been paid:
- 5% ethanol blended petrol,
- 10% ethanol blended petrol and
- Bio-diesel, up to 20% by amount.
Usage of cess
Section 7 of the Central Road and Infrastructure Fund Act, 2000 lays down that CRF shall be utilized for the–
- Maintenance and development of National Highways;
- Rural road development;
- Development and rehabilitation of many State highways including interstate and commercially important highways;
- The building of highways under or over the railway by methods of a bridge and installation of protection works at unauthorized railway crossings; and
- Disbursement in support of such ventures as the Ministry may recommend.
Objective of the amendment
The amendment aimed to use road cessation funds under CRIF to financially support other infrastructure projects such as waterways, several other fractions of the railway infrastructure but also social infrastructure, including educational institutions and medical colleges.
The Government set up a ministerial panel led by the finance minister to determine the distribution of funds from the CRIF for infrastructure projects. According to a government notice, the four-member committee will accept suggestions provided by the Sub-committee led by the Secretary of Economic Affairs upon its list of infrastructure projects to be sponsored by the CIRF. Following things were also mentioned in the notification-
- Other committee representatives comprise road transport and highways secretaries, airports, and human resource development.
- The sub-committee of 15 representatives includes secretaries from different ministries who will study and assess suggestions obtained from ministries on infrastructure projects to be funded by the CRIF.
- In addition, the list of infrastructure projects should be granted priority every year
Benefits from the amendment
According to ministerial resources, the Government had collected Rs 2.69 lakh crore as cess under Central Road and Infrastructure Fund (CRIF) and Central Road Fund (CRF) in the last three fiscals. A whopping Rs 1.13 lakh crore has been collected in the last fiscal (2018-19). Rs 83,116 crore has been collected in 2017-18 and Rs 72, 400 crore has been collected in 2016-17.
Future expansion project by the government
- In the budget session of 2020-21, the Finance Minister made the following announcements regarding the infrastructure development plans in the coming year- Within the next five years, Rs 100 lakh crore will be spent over infrastructure.
- Intensified construction of the highways will be pursued. This will involve the construction of 2500 km of highways for access control, 9000 km of economic corridors,
- 2,000 km of maritime and land-port roads and 2,000 km of strategic waterways.
- The Delhi-Mumbai Expressway and two other projects are scheduled to be finished by 2023. The Chennai-Bengaluru Expressway will begin.
- At a minimum of 12 lots of over 6,000 km of highway, packages would be monetized until 2024.
Allocation of CRIF fund in the Budget 2020-21
The budget for highways and bridges in 2020-21 is Rs 48,777 crore. Bridge and bridge costs include the construction of NHs, projects linked to expressways, an expansion in the number of lanes under different programs, and the improvement of road access in the areas impacted by left-wing extremism.
NHAI is being allotted Rs 42,500 crore in 2020-21, which is 16 per cent higher than the revised data for 2019-20 (Rs 36,691 crore). From the current budget amount, 49 per cent (Rs 20,750 crore) would be given from the Central Road and Infrastructure Fund, 27 per cent (Rs 11,500 crore) will be funded from the Permanent Bridge Fees Project, and the remainder 24 per cent (Rs 10,250 crore) will come from monetization of the National Highways Fund.
In particular, the allocation from CRIF to the Ministry has projected at Rs 59,622 crore for the year 2020 for the effective completion of these projects. This is a 9 per cent rise from the latest 2019-20 (Rs 54,539 crore) predictions.
Conclusion
Even with the allotment of various Funds Like CRIF road sector in India is facing some of the major issues like lack of equity with developers, higher financing costs, lack of maintenance funds, lack of availability of land for expansion of NHs, the significant increase in land acquisition costs, and bottlenecks and checkpoints on NHs that could adversely affect the benefits of GST and increasing NPAs in the infrastructure sector. The sector faces major financial issues because the sector has no funding support other than the central government. Hence the Ministry of Finance and RBI is always suggested by the ministry of road and transport for the development of a dedicated financial institution for the infrastructure and road sector.
References
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