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Scope of road cess use to be expanded
December, 19th 2006
Financing rural projects and for repayment of loans


Road to development
Over next 4 years, Rs 16,000 cr may be available via cess
The total requirement is Rs 48,000 cr

The Government plans to expand the scope of road cess collected from motorists to finance rural road projects. The money collected through the cess on petrol and high-speed diesel would also be used for repaying loans taken for developing rural roads.

The Government has to resort to raising funds through loans and borrowings for developing rural roads as the funds accruing from cess are not enough to cover the rural road development programme. Over the next four years, Rs 16,000 crore is expected to be available for rural roads from the road cess, whereas Rs 48,000 crore is required to meet Government's target of providing road connectivity to all rural habitations with a population of over 1,000 (and over 500 in hilly and tribal areas).

To bridge the gap between funds required and funds likely to be available, the Government has decided to borrow Rs 16,500 crore over four years by creating a separate window under National Bank for Agriculture and Rural Development (NABARD). It also plans to raise Rs 9,000 crore through loans from World Bank and the Asian Development Bank.

To expand the scope of the road cess usage, the Minister of Road Transport and Highways, Mr T.R. Baalu, on Monday introduced a Bill in Lok Sabha to amend the Central Road Fund Act, 2000. He stated, "Since the Central Road Fund Act, 2000 does not have any provision for borrowing for rural roads and utilisation of the proceeds of future cess for repayment of loans, the Central Road Fund (Amendment) Bill, 2006 seeks to amend the Act to enable the Central Government to raise funds for development of rural roads and it may use the share of funds for the repayment of any loan taken for the development of rural roads in any State or Union Territory."

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