This article is written by Naman Sherstra from the Department of Law, University of Calcutta. The article briefly discusses the Central Road Fund Act 2000, its amendment, and the criticisms.
Table of Contents
Introduction
In the past decades, India has witnessed fast growth in the road infrastructure. The road projects like the National Highways Development Project, Pradhan Mantri Gram Sadak Yojana are in the phase of completion. The Government focused on the development of road infrastructure which demanded an inexhaustible fund for fuelling up finance to the vast road projects. For the sake of financing such road projects the “Central Road Fund” was created by the parliament under the Central Road Fund Act 2000. The main aim of creating the fund was to provide finances for the development of National Highways, State Highway, Rural roads, railway over and under bridges.
Central Road Fund Act
The Central Road Fund Act is a non-lapsable fund created under Section 6 of the Central Road Fund Act 2000. This fund was created out of the cess or tax imposed by the Union Government on the petrol or diesel to maintain the National highways, state roadways, (particularly of economic importance and connecting inter-state), rural roads, railway under an overbridge, and national waterways (from 2017 amendment).
Objectives
The major objective of the Central Road Fund Act 2000 was to create a fund by the tax on petrol and diesel, which can provide finances to the ministries for the construction and maintenance of national and state highways including railways and national waterways. It was created to strengthen the roadways system in India.
Salient Features
- Under Section 3 of the Central Road Fund Act 2000, the funds received from the cess or tax is initially credited to the consolidated fund of the parliament. After that, the Central Government by consulting parliament by appropriate law transfers the required fund to the Central Road Fund.
- The funds received under the Central Road Fund are distributed among the three ministries- Ministry of Road Transport and Highways, Ministry of Railways, Ministry of Rural Development. Such ministries further use the fund in different project works.
- Under Section 8 of the act, the accounts and audits of such funds are constantly monitored by the accounts department of the Central Government in consultation with the Comptroller and Auditor General of India. The profits, loss and the transactions of the funds’ allocation are also monitored by the same department.
- The accounts of such funds are audited by the Central Government on a time to time basis or at the specified time.
- Under Section 5 of the Act if the necessity of loans and grants arises, the Central Government on the appropriation made by the parliament after framing law in regard may draw loans and grants it seems needed.
- Under Section 3 of the Act, the Central Government shall apply levy, the duty of excise to the-
- person who either produces or imports petrol and diesel;
- such companies, factories or outlets which removes such petrol and diesel;
- transferred by a person producing such petrol and diesel to another person. The cess levied on petrol and diesel under the Act shall be at a rate of rupee 1/litre. If the additional custom or duties is levied on the petrol and diesel it shall be done under the provisions of Finance (No 2) Act, 1998, and Finance Act 1999.
- In case of refunds and exemption on the duties related to the levy and collection of cess under the aforesaid Act the provisions of the Central Excise Act 1944, and Central Customs Act 1962 shall apply.
Functions
The Central Government has been authorized for all functions related to the Central Road Fund under the Act. The functions of the Central Government Provided under Section 10 of this Act are as follows:
- The Central Government shall manage and administer the share of the funds which are allocated for the development and maintenance of highways. The Government shall also allocate the schemes of state roads and roads of economic importance.
- The Central Government shall show co-ordination and complete the utilization of the sanctioned funds for the development of the roadways on time.
- The Central Government shall make decisions over the approval and sanction the funds to the specific roads of the inter-state and of economic importance. It shall also release the funds to the state government for the development of such specific roads projects and monitor the projects and expenditure over such road projects. The funds shall be allocated to the states and Union Territory as provided in the ‘First Schedule’ of the Constitution of India.
- The formulation criteria for the allocation of funds to the roadways project and maintenance of the National Highways are needed to be implemented by the National Highway Authority of India.
- Percentage allocation of the cess/tax on the Petrol and diesel for the development of different types of the roadways are as follow-
- Fifty percent of the collected cess from petrol and diesel shall be used for the development of the rural roadways.
- Out of the rest left fifty percent, percentage of fifty-seven and one-half percent of the cess recovered shall be used for the development and maintenance of the national highways, twelve and a half percent of the cess on the development and construction of under or over railways bridge as well as safety barricades at the road railway crossings.
- Out of the rest of the thirty percent left amount, shall be used for the development of the roads of economic importance and inter-state roads.
- The Central Government by the way of amending the Finance Act 2005 increased the cess on petrol and diesel as an additional excise duty up to two rupees. Now, from the date of 1st March 2005, the allocation for the development and maintenance of highways shall be now 50 paise out of the increased 2 rupees.
Powers
Under Section 11 and Section 12 of the Act, the Central Government has the following powers-
- The Central Government has the power to allocate the funds to the State and Union Territory. It will hold the part of funds and release it when the State and Union Territory is in need of such funds.
- The Central Government has the power to hold the funds of the State and Union Territory if it believes that the State and Union territory without reasonable delay fails in the application of the send funds.
- The Central Government will send the re-allocated funds in the main accounts of the state or Union territory in the preceding year. Any type of balance of credit of funds regarding the allocation shall not lapse at the end of the financial year.
- The Central Government has the power to make rules by making a notification in the Official Gazette:
- Regarding the funds used for the development of highways, state-roads, railways under and over bridges;
- Regarding the manner under which the Concerned accounts department of the Central Government has the power to maintain the account and balance sheets, profit-loss of the Central Road Fund under the consultation of the Comptroller and the Auditor General;
- Regarding the formulation and sanctioning of the funds allocating to the State and Union territory for the development of the inter-state connecting roadways and roads of economic development.
If any rule or modification is brought under this Act, such modification shall be brought before both the houses of the parliament and such rules are subject to the nod of both of the houses of parliament under Section 13 of this Act.
Recent Amendments
The Ministry of Road Transport and Highways introduced the amendment bill “The Central Road Fund (Amendment) Bill” on 24th July 2017 in the parliament which was passed by the lower house (Lok Sabha) on 19th December 2017. The major objective of the amendment was to allocate the funds collected under the cess to the infrastructure projects which include waterways, some portion of the railways, and social infrastructure (educational institutions, medical colleges). The major amendments brought under the Act are as follows:
- The budget of 2018 amended the previous Act and renamed the Central Road Fund Act 2000 to the Central Road and Infrastructure Fund.
- The domain under which the Central Road and Infrastructure Fund were changed from the Ministry of Road, Transport, and Highways to the Ministry of Finance. The CRIF shall be regulated under the Department of Economic Affairs, Ministry of Finance.
- The amendment provides that the cess received from the motor spirit (petrol and Diesel) shall be credited to the Consolidated Fund of India and after adjustment of tax collection the Government shall transfer to the Central Road and Infrastructure Fund.
- According to the amendment, the Central Government shall constitute a committee of 15 sub-members from different ministries for sake of distribution of funds to each and every area of the Infrastructure and the projects from the Central Road and Infrastructure Fund. Such, committee shall be headed by the Finance Minister.
- The projects of Pradhan Mantri Gram Sarak Yojana and the National Highway Development Programme will be completed. The remaining part of the National Highway Development Programme shall be merged into the new road development projects (83,000 Km including Bharatmala Phase 1). Hence, there was a need to widen the scope of the Central Road and Infrastructure Fund and use the road cess collected for the development of other infrastructure projects also. The newly amended Act shall introduce the new domains of waterways and infrastructure projects like educational institutions and medical colleges as well.
Data of the Road Cess Collected during the past three years
|
Financial Year 
|
Total Fund Collected under CRIF (Amount in Rs. Crores) |
|
2016-17 |
72,399.53 |
|
2017-18 |
83,116.42 |
|
2018-19 |
1,13,000.00 |
(Source– PIB Government of India)
Criticism Received
The Central Road and Infrastructure Fund have to face a lot of criticism due to many reasons:
- A large part of the fund is left unutilised as the State and Union territory do not use the funds for the development of roadways.
- A statistical data shows that the actual fund utilisation by the Ministry of Road Transport and Highways has been quite low for the past 7 years. However, in the financial year 2015-16, there has been a quite increase (42%) in the expenditure of the funds.
- The low project proposals and slow work progress from the North Indian States have reduced their proper utilisation of the funds. However, the South Indian states due to proper management and project proposals have utilised the funds in better ways.
- The road sector has to face the problem of higher non-performing assets due to the non-disbursement of the loan.
- The Comptroller and Auditor General of India in the financial year 2016 has found NHAI indulged in violating several procedural guidelines of the Ministry including non-maintenance of project-wise expenditure balance sheet and cost flow.
- The funds provided by the Ministry for the maintenance of National Highways are only 1 percent of the budget as the length of the Highways is approximately 1.14 Lakh kilometres. So, the maintenance fund is quite low as compared with the higher length of the National Highways.
- Due to the increase in compensation of the land acquisition under the Land Acquisition Rehabilitation and Resettlement Act, 2013, the NHAI is facing the problem of funds hampering.
Conclusion
The Central Road and infrastructure fund (earlier, the Central Road Fund Act) has been brought to extend the network of roadways in every part of the country. Now, the fund also provides finances for the development of waterways which are the cheapest mode of transportation and for the infrastructure and educational institutions development. The mismanagement of the funds by roadways authorities like NHAI, state governments hampers the purpose of the fund for which it was created. The Ministries of the Central Government and State Government need to come with strategic planning and proper management of the funds so that the funds could be properly utilised in all the domains provided in the Act. The Central Government also needs to increase the percentage of funds for the maintenance of the Highways. The mutual cooperation of the Central Government, State Government and the authorities concerned will surely come up with the target for what the Act was created.
References
https://www.indianeconomy.net/splclassroom/central-road-infrastructure-fund-crif/
LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:
