Raking up another controversy, a Planning Commission Working Group has suggested that to meet fund requirement for building National Highways in 12th Plan (2012-17), the Government should increase road cess on petrol and High Speed Diesel (HSD) “suitably” from the present level of Rs 2 per litre. It, however, has not mentioned the quantum by which it should be increased.

The Group has estimated that Rs 54,898 crore should be generated through road cess in the 12th plan to meet the huge funding requirement of central road projects (see table). In the 11th plan (2007-12), the Government is estimated to have collected Rs 38,771 crore as road cess.

The Group is headed by then Secretary of Ministry of Road Transport and Highways RS Gujral and the recommendations will be considered by Steering Committee of the Planning Commission in formulating policy for National Highways in the 12th plan.

Recently, a Working Group on Urban Transport headed by former Delhi Metro chief E Sreedharan had raised a controversy by suggesting that to generate resources for public transport projects, a green surcharge of Rs 2 per litre on petrol, a green cess of 3 per cent of the annual insured value of all private vehicles, and a urban transport tax on purchase of new cars and two-wheelers at 7.5 per cent of the total cost of petrol vehicles and 20 per cent in case of personal diesel cars may be levied. The recommendations led to prime time debates on TV channels and filled edit pages of major newspapers.

The Group also said that as an alternate the Government may consider levy of cess on petrol and HSD as per the provisions of the Central Road Fund Act, 2000 on ad-valorem basis in place of the current policy of charging it at Rs 2 per litre. The additional accrual should be used not only for building National Highways but maintaining and repairing also.

Ad-valorem is a tax based on the quantity of an item. If the road cess is levied on ad-valorem basis in place of the current policy of charging it at Rs 2 per litre, it would be higher depending on the quantum of ad-valorem duty as it would be calculated on the number of litres you purchase.

Since maintenance is a non-plan activity, there is also a tendency by the Government to apply ad-hoc cuts in the face of resource constraints. Thus, a part of the additional accrual could be allocated for maintaining and repairing activities, the Group said in the report.

It is noteworthy that when the country is preparing to move towards a unified goods and service tax (GST) regime, the Government has indicated that motor fuel would remain outside the purview of GST. Thus, no relief in sight for common man as fuel is one of the most heavily taxed items in India.