Road Funds

Road Funds have emerged as one of the more popular forms of financing road sector maintenance funding gaps in the South Asia Region.  Conventional Road Funds are commonly referred to as 'first generation' funds, and 'good practice' or commercially managed funds with financial discipline and minimum adverse impact on the budget are called 'second generation' funds.  To know more about Road Funds click here.

• India has successfully revitalized the Central Road Fund (CRF) since 2000. CRF now provides funds for the development and maintenance of national, state road network, and construction of rural roads. Besides CRF, some states and districts have also established road funds for local road network maintenance and development.
• Pakistan National Highway Authority (NHA) has been running a Road Maintenance Account (RMA) and is in the process of establishing a Road Maintenance Fund (RMF) with distinct ‘second generation’ road fund characteristics.
• Nepal has established an autonomous Roads Board Nepal (RBN) since July, 2002. RBN is the first “second generation” road fund in South Asia Region.
• Sri Lanka has a Road Maintenance Trust Fund (RMTF) in operation — a transitional set up to a dedicated second generation Road Fund to fund the road maintenance of national and provincial highways.
• Bangladesh has decided to establish a road fund. A Road Fund Advisory Committee and a Road Fund Establishment Office have been formed to guide the establishment of road fund.
• Bhutan is also considering a road fund.

India

Central Road Fund. The CRF was established in 1930 and revitalized under the Central Road Fund Act, 2000. Together with the increasing number of PPPs, the CRF has been the most significant development in the road sector in India in recent years. It has brought considerable new resources to finance the development and maintenance of the National Highway and State Highway network and the construction of new Rural Roads. These additional resources are generated through an explicit cess on fuel (petrol and high speed diesel), and their allocation to national highways, state highways, and rural roads has been clearly defined in the Act. The Fund currently collects around US$ 1.23 billion annually.

The CRF is at present an accounting mechanism, under the Ministry of Finance, without any capacity of its own to negotiate work programs with road agencies, scrutinize disbursement applications, or commission financial or technical audits of expenditure.

State Road Funds. There has also been experimentation with dedicated road funds at the state level. Assam, Kerela, Maharashtra, and Uttar Pradesh have established road funds while many other states governments are moving towards setting up such funds.

These state road funds are financed by multiple resources: budgetary support from central government 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. 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).

Pakistan

The National Highway Authority (NHA) has begun implementing the fee for service concept on its Road Maintenance Account (RMA). Toll revenue over 57 toll stations is the main funding source for RMA. 80 percent of RMA's resources are collected from road user charges and 20 percent come from the Government budget. Toll revenues represent 92 percent of resources from road users.

Institutional arrangements have been put in place to improve NHA’s external accountability to the road users, such as regular stakeholder consultations, clear performance indicators, and annual reports and audited accounts in the public domain. The Government has agreed to separate management of road maintenance resources from execution and is in the process of creating a dedicated Road Maintenance Fund.

Nepal

The Nepal Roads Board was constituted by the Roads Board Act of July 2002 with the aim of maintaining the road network through a sustainable fund in a planned, cost efficient, and transparent manner. The Board is established as an autonomous corporate entity with public private partnership.

The Board derives its revenue from tolls, fuel levies, vehicle registration fee, and grants or loans from the Government and international agencies. At present, the fund meets about one third of the total maintenance requirements. About 70 percent of Board revenues are allocated to maintenance of the strategic road network and 30 percent to maintenance of the local and rural road network.

The Board can set quality standards, monitor implementation by road agencies, undertake financial and technical audits of road agencies, and has the power of sanction in case of violations.

However, The Board is not so efficient at decision making and resolving issues. Also, the private sector participation is ineffective even though there are private sector representatives in the Board. In addition, the Board has no autonomy over flow of funds: revenues (except tolls) are collected by other agencies and go through treasury. So, the Board is yet to improve its performance for efficient operation ensuring adequate maintenance resources.

Sri Lanka

To ensure enough resources for national and provincial road maintenance, the Road Maintenance Trust Fund (RMTF) was set up in the Central Bank and started its full operation on Jan 31, 2007. The Fund is entirely financed from government budget. Starting with an initial $30 million for 2006, RMTF budget is expected to increase by $4 million every year until 2010. The Funds will then be transformed into a dedicated second generation road fund.

Bangladesh

A Road Fund Advisory Committee with members from both public and private sectors has been formed to guide the establishment of a new road fund. A Road Fund Establishment Office (RFEO) was established in March 2005 to draft legislation and operational policies and procedures to make the proposed Board functional.

The proposed financial resources for the road fund are: levy on fuel and diesel, International transit charges to foreign vehicles using the roads of Bangladesh, vehicle charges (based on vehicle size and weight), and other fees/charges recommended by the Board and approved by MoF for the purpose of road maintenance.

Bhutan

While no firm decision has yet be taken by the Government, it is proposed that the main revenues of the road fund envisaged in Bhutan come from the refund of duties on imported gasoline and diesel, to avoid the negative impact on traffic by direct levies on petrol and diesel.

Comparison of the Road Funds in India, Pakistan & Nepal