Central Road Fund (CRF)
Central Road Fund (CRF) is a non-lapsable fund created under Section 6 of the Central Road Fund Act, 2000 out of a cess/tax imposed by the Union Government on the consumption of Petrol and High Speed Diesel to develop and maintain National Highways, State roads (particularly those of economic importance and which provides inter-state connectivity), rural roads, railway under/over bridges etc. Around Rs. 20,000 crores get collected under CRF per annum (during the years 2012-14).
Road Funds are a globally accepted mode of financing (for plugging funding gaps) road development and maintenance. World Bank classifies road funds into two: Conventional Road Funds are commonly referred to as 'first generation' funds. Those funds with commercial/ professional management, financial discipline and minimum adverse impact on the Government's budget (they are generally off-budget) are called 'second generation' funds. CRF in India is a first generation fund. Many South Asian nations like Nepal, Pakistan, Sri Lanka etc. are known to have adopted road funds either in the first generation or second generation format. A World Bank review of such funds may be seen here.
Sources of CRF
An Additional Duty of Customs (tax on imports) and an Additional Duty of Excise (tax on production) are levied and collected as cess (cess is any tax levied for a specified or earmarked purpose) on Motor Spirit, commonly known as Petrol, under Section 103 and Section 111 respectively of the Finance (No.2) Act, 1998. Also, an Additional Duty of Customs and an Additional Duty of Excise is levied and collected as cess, on High Speed Diesel Oil under Section 116 and 133 respectively of the Finance Act, 1999. Government is at present collecting Additional Excise Duty (Road Cess) on Petrol and Diesel at Rs 2.00 per litre. In addition, Education Cess @ 2% and higher Education Cess @ 1% (total 3%) is also applicable on excise duty and customs duty levied on petroleum products. These duties are imposed on petrol and high speed diesel produced in or imported into India and— (a) removed from a refinery or a factory or an outlet; or (b) transferred by the person, by whom such item is produced or imported, to another person.
The revenue collected is initially credited to the Consolidated Fund of India and after adjusting for the cost of collection, Parliament through its appropriation bill, credits such proceeds to the Central Road fund (CRF). The CRF is thereafter distributed amongst three Ministries i.e. Ministry of Rural Development, Ministry of Railways and Ministry of Road Transport and Highways in the manner prescribed under Section 10(viii) of the Central Road Fund Act, 2000.
Utilisation of the Central Road Fund
Section 7 of the Central Road Fund Act, 2000 lays down that CRF shall be utilized for the –
- development and maintenance of national highways;
- development of the rural roads;
- development and maintenance of other State roads including roads of inter-State and economic importance;
- construction of roads either under or over the railways by means of a bridge and erection of safety works at unmanned rail-road crossings; and
- disbursement in respect of such projects as may be prescribed by the Government.
Section 10(viii) of the Central Road Fund Act, 2000 (as modified through an amendment in 2005) details how the allocation of funds should take place. Presently, a cess of Rs. 2 per litre on petrol and high speed diesel is being levied. Out of this, an amount of Rs. 1.5 is being allocated in the following manner:
- 50% of the cess on high speed diesel (HSD) oil for development of rural roads. (Under Ministry of Rural Development)
- 50% of cess on HSD and the entire cess collected on petrol are allocated thereafter as follows:
- An amount equal to 57.5% of such sum for the development and maintenance of National Highways; (under Ministry of Road Transport and Highways)
- An amount equal to 12.5% for construction of road under or over bridges and safety works at unmanned railway crossing (Under Ministry of Railways); and
- An amount equal to 30% on development and maintenance of State Roads. Out of this amount, 10% is kept as reserved by the Central Govt. for allocation to States for implementation of State Road Schemes of Inter-State Connectivity and Economic Importance to be approved by the Central Government. (under Ministry of Road Transport and Highways)
Balance cess of Rs. 0.5 per litre is entirely allocated for development and maintenance of National Highways.
The allocation of funds from Central Road Fund (CRF) for each State /Union Territory (UT) is finalized at the beginning of the financial year. The accrual of funds annually earmarked for the development of State Roads (other than Rural Roads) are distributed to the States on the basis of 30% weightage to fuel consumption and 70% weightage to the geographical area of the States. All the States/UTs are provided with one-third of their allocation of CRF, which is maintained as reserve by the States/UTs. This is replenished by subsequent releases based on receipt of utilization certificates for the amount previously released and the progress of works.
The Central Road Fund (State Roads) Rules, 2007 provide for a stipulated maximum project completion period of 24 months for projects sanctioned under this scheme. Excess cost beyond 10% of the approved amount is not accommodated by the Union Government and the unfunded amount would have to be mobilised by the executing agencies themselves.
The procedure for identification, prioritization, preparation of detailed proposals for the projects to be funded under the Central Road Fund (CRF) scheme has been modified with effect from 01.04.2010. The projects under CRF are sanctioned for the full cost based on Detailed Project Report. This is to make the cost estimation realistic as also to avoid downsizing of the projects by some States to reduce scope of work and restrict the cost within the limit of 10% excess.
History of CRF
The Union Government used to allocate funds for development of State Roads to the respective State Governments under Central Road Fund (CRF) Scheme. Central Road Fund Scheme was constituted on 1 March 1929 by setting apart an amount of Rs. 2.64 paise per litre out of the Custom & Central Excise Duty levied on petrol for the development of the State Roads. The cess was increased from time to time to meet the challenges of accelerated funding requirement for all categories of roads in the country. A resolution on governing CRF was passed by the Parliament on 13 May 1988. The Central Road Fund was revamped further in 1998-99. This has been given a statutory status by the Central Road Fund Act enacted on 27 December 2000. However, this Act came into force with effect from 1 November, 2000. The Rules for disbursement of the fund to states were notified later on 10 July 2007. The implementing Ministries are Ministry of Rural Development, Ministry of Railways and Ministry of Road Transport & Highways.
The schemes of Inter State Connectivity and Economic Importance had been in existence prior to the enactment of CRF Act 2000 where only modest programmes of work were sanctioned with Central loan assistance. The scheme has now been regulated in accordance with the provisions in the Central Road Fund Act, 2000.
Some of the state governments also run separate road funds in India. For instance,
- Uttar Pradesh (UP) State Road Fund in 1998,
- Madhya Pradesh (MP) Farmer's Road Fund in 2000,
- Kerala State Road Fund in 2002,
- Assam State Road Fund in 2003,
- Karnataka Chief Minister's Rural Road Development Fund in 2004,
- Rajasthan State Road Development Fund in 2004[3.
These state road funds are financed by multiple resources: -primarily through budgetary support from central government (from CRF) and state government, direct road user charges from cess on fuel, motor vehicle taxes, fees and tolls, indirect road user charge/tax such as hotel tax and levy on agriculture products, and other resource such as fines, loans etc.. Similar to CRF, these road funds are used both for development and maintenance of road network, except the one in Uttar Pradesh, which is dedicated for road maintenance. In addition, some states also established road funds for the development and maintenance of district and rural roads. Madhya Pradesh has the Farmer's Road Fund, and Karnataka established the Chief Minister's Grameen Raste Abhivrudhi Nidhi (CMGRAN).
A Railway Safety Fund has been set up primarily to channelise the Railways' share of the diesel cess and petrol cess, receivable under the Central Road Fund, for road related railway safety works such as construction of road over/under bridges, subways and for the improvement to level crossings including their manning, interlocking etc. The Railway Safety Fund was created in the year 2001-02.
The summary of the allocation and release in respect of states/UT roads since the year 2000-01 is given in the Annual Reports of Ministry of Road Transport and Highways. The details of cess collected during the last three years as per the Receipt budget is as under:
(Figures in Rs. Crore)
|Type of Duty||2011-12 (Actual)||2012-13 (Actual)||2013-14 (Actual)||2014-15 (Budgeted)|
|Additional Duty of Customs on Motor Spirit||119.02||25.93||26.00|
|Additional Duty of Customs on High Speed Diesel Oil||191.28||45.78||6.00|
|Additional Duty of Excise on Motor Spirit||3853.49||3819.11||4300.00||4700.00|
|Additional Duty of Excise on High Speed Diesel Oil||14574.51||15513.56||15300.00||16700.00|