Sea of cesses: But just what got used up last year?

The Budget 2005 has hiked the road cess on diesel and petrol by 50 paise per litre. Finance Minister P Chidambaram pointed out in the budget...

The Budget 2005 has hiked the road cess on diesel and petrol by 50 paise per litre. Finance Minister P Chidambaram pointed out in the budget that the additional cess is to meet the funds required for the National Highways Development Project (NHDP), which “requires very large resources”.

According to the revised estimate, in 2004-05 the government collected Rs 1,758 crore as cess from petrol and Rs 7,399 crore as cess from diesel. This is expected to go up to Rs 2,434 crore from petrol and Rs 9,948 crore from diesel in 2005-06.

Hence, while the government collected Rs 9,157 crore in 2004-05 and will collect Rs 12,382 crore in 2005-06, will the cess proceeds be put to good use?

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Going by the last year’s experience, that may not happen. According to media reports, though the cess was collected since April 1, 2003, nothing was spent from it since the department of road transport and highways, the rail ministries and the states could not work out a formula between themselves on allocating the proceeds. The matter was then referred to the CCEA which subsequently put the issue before a GoM.

The department of road transport and highways also identified the non-receipt of additional cess funds as one of the main constraints, among other factors, in the progress of the NHDP.

The department had also urged the finance minister to release funds immediately from the additional cess receipts, as per the existing formula under the CRF Act in 2003-04 and then subsequently according to the amended formula being worked out by the GoM.