To build highways, the National Highways Authority of India (NHAI) received Rs 8,441 crore in fiscal 2011 from fuel cess. This is 2.5 times more compared to the amount collected in 2006, according to data in the Economic Survey.
A part of fuel cess imposed on petrol and diesel is allocated to NHAI to fund implementation of NHAI projects. The NHAI leverages the cess flow to borrow additional funds from the debt market.
The cess collected on petrol and high speed diesel (HSD) oil is collected in a dedicated fund called Central Road Fund (CRF). Since 2006-07, Rs 2/litre is collected as cess on petrol and high speed diesel (HSD) oil, out of which 50 paise goes towards national highways.
From the remaining Rs 1.50/litre, 50 per cent of cess collected from HSD is only routed for rural road development.
This leaves 50 per cent of cess on HSD and the entire cess collected on petrol. This is allocated between national highways (57.5 per cent), road over bridges and unmanned level crossing (12.5 per cent), and State roads (30 per cent).
Till fiscal 2006, only Rs 1.50 was collected as fuel cess. A sharp jump between fiscal 2006 and 2007 is due to imposition of 50 paisa on fuel dedicated for national highways.
Incidentally, the Road Transport and Highways Ministry has wanted to move over to an ad-valorem format of fuel cess instead of the fixed format. But, the final call on the issue lies in the hands of Finance Ministry.