UTTAR PRADESH STATE ROADS PROJECT Under …Final).pdf · · 2016-08-20UTTAR PRADESH STATE ROADS PROJECT Under IBRD Loan No. 4684-IN ... CF Consolidated Fund MIS Management Information

PUBLIC WORKS DEPARTMENT Government of Uttar Pradesh, India

UTTAR PRADESH STATE ROADS PROJECT Under IBRD Loan No. 4684-IN

Technical Assistance for Implementation of Institutional Reforms in the Road Sector of Uttar Pradesh

IMPLEMENTATION OF GOUP DECISIONS ON REVISED TAXES / SURCHARGES FOR ROAD FUND

[FINAL]

Report No. 5

February 2008

LEA International Ltd., Canada in joint venture with

LEA Associates South Asia Pvt. Ltd., India in association with

Ministry of Transportation of Ontario, Canada

Glossary

ADB Asian Development Bank LOS Level of Service

ADT Average Daily Traffic MDR Major District Roads

AE Assistant Engineer MLA Member of Legislative Assembly

AASHTO American Association of State Highway and Transport Officials MIS Management Information System

BC Bituminous Concrete MOST Ministry of Surface Transport

BOT Built Operate Transfer MoSRTH Ministry of Shipping, Road Transport & Highways

CCL Cash Credit Limit MoF Ministry of Finance

CE Chief Engineer MoRTH Ministry of Road Transport and Highways

CEO Chief Executive Officer M&E Monitoring and Evaluation

CF Consolidated Fund MIS Management Information System

CII Confederation of Indian Industries MRN Major Road Network

CNG Compressed National Gas MMS Maintenance Management System

CRF Central Road Fund MoU Memorandum of Understanding

CRN Core Road Network MSA Million Standard Axle

CRRI Central Road Research Institute NABARD National Bank of Agricultural and Rural Development

CBR California Bearing Ratio NITHE National Institute for Training of Highway Engineers

DBM Dense Bituminous Macadam NH National Highway

DBC Dense Bitumen Concrete NHAI National Highways Authority of India

DCL Deposit Credit Limit NREP National Rural Employment Programme

DPR Detailed Project Report ODR Other District Road

DRDA District Rural Development Authority OD Origin and Destination

EE Executive Engineer OECF Overseas Economic Cooperation Fund

E-in-C Engineer in Chief O&M Operation and Maintenance

EIA Environmental Impact Assessment PBMC Performance Based Maintenance Contracts

EMP Environment Management Plan PC Premix Carpet

ESAL Equivalent Single Axle Loads PCC Project Coordinating Consultant

FSI Floor Space Index PCI Pavement Condition Index

GO Government Order PCU Passenger Car Unit

GOI Government of India PIARC Permanent International Association of Road Congress

GoUP Government of Uttar Pradesh PMS Pavement Management System

GPF Government Provident Fund PSP Private Sector Participation

GSDP Gross State Domestic Product PWD Public Works Department

HQ Head Quarter RES Rural Engineering Services

HR Human Resource RF Road Fund

IAWG Inter Agency Working Group RFA Road Fund Administration

IDS Institutional Development Strategy RFB Road Fund Board

IDSP Institutional Development And Strengthening Plan RFMC Road Fund Management Committee

IIM Indian Institute of Management RIDF Rural Infrastructure Development Fund

IRC Indian Road Congress RMMS Road Maintenance Management System

IRI International Roughness Index ROB Road Over Bridge

IT Information Technology RoW Right of Way

ISAP Institutional Strengthening Action Plan RUB Road Under Bridge

JE Junior Engineer SDBC Semi Dense Bitumen Carpet

LACI Loan Administration Change Initiative SE Superintending Engineer

SH State Highway

SHA State Highway Authority

SPV Special Purpose Vehicle

SRF State Road Fund

SRFMC State Road Fund Management Committee

SRP-II State Road Project-II

TA Technical Assistance

TNA Training Needs Assessment

TDSD Traffic Density Survey Division

ToR Terms of Reference

UP Uttar Pradesh

UPAAM Uttar Pradesh, Academy of Administration and Management

UPRNN Uttar Pradesh Rajkiya Nirman Nigam

UPRDP Uttar Pradesh Road Development Policy

UPSBC Uttar Pradesh State Bridge Corporation

UPSRTC Uttar Pradesh State Road Transport Corporation

UPSBCL Uttar Pradesh State Bridge Corporation Limited

UPSRP Uttar Pradesh State Road Project

UPSHA Uttar Pradesh State Highway Authority

VDF Vehicle Damage Facture

VOC Vehicle Operating Cost

VR Village Roads

WB World Bank

WBM Water Bound Macadam

WMM Wet Mix Macadam

Technical Assistance for Implementation of Institutional Reforms in Road Sector of Uttar Pradesh Report No. 5

February 2008 i

TABLE OF CONTENTS

1. INTRODUCTION .............................................................................................................................. 1 1.1 THE IDS REPORT .............................................................................................................. 1 1.2 THE ISAP TA PROJECT .................................................................................................... 1

2. ROAD FUNDS – A BACKGROUND ............................................................................................... 3 2.1 INTRODUCTION ................................................................................................................. 3 2.2 EXPERIENCE OF ROAD FUNDS ...................................................................................... 3 2.3 INTERNATIONAL EXAMPLES ........................................................................................... 4 2.4 KEY LESSONS LEARNED ................................................................................................. 5 2.5 EXAMPLES FROM INDIA .................................................................................................. 6

2.5.1 The Central Government Road Fund of the Government of India ......................... 7 2.5.2 The Kerala Road Fund ........................................................................................... 7 2.5.3 Madhya Pradesh .................................................................................................... 9 2.5.4 Karnataka ............................................................................................................. 10

3. THE SITUATION IN UTTAR PRADESH ....................................................................................... 11 3.1 INTRODUCTION ............................................................................................................... 11 3.2 FUNDING OF THE ROAD FUND ..................................................................................... 12 3.3 THE STATE ROAD FUND MANAGEMENT COMMITTEE [SRFMC] .............................. 14

4. DEVELOPING A PROGRAMME ................................................................................................... 15 4.1 INTRODUCTION ............................................................................................................... 15 4.2 THE CASE FOR ROAD MAINTENANCE ......................................................................... 15 4.3 MAINTENANCE CATEGORIES ....................................................................................... 16 4.4 ROUTINE MAINTENANCE ............................................................................................... 16 4.5 PERIODIC MAINTENANCE ............................................................................................. 17 4.6 EMERGENCY REPAIRS/MAINTENANCE ....................................................................... 17 4.7 WORKS INTERVENTION PRIORITIES ........................................................................... 17 4.8 CURRENT ROAD MAINTENANCE AND STANDARDS .................................................. 18 4.9 ESTABLISHING ROAD MAINTENANCE STANDARDS .................................................. 20 4.10 MAINTENANCE AND REHABILITATION REQUIREMENTS .......................................... 21 4.11 DATA REQUIREMENTS AND ANALYSIS ....................................................................... 21

4.11.1 Road network condition ....................................................................................... 22 4.11.2 Identification of requirements ............................................................................... 23


February 2008 ii

5. OPTIONS FOR THE ROAD FUND ............................................................................................... 25 5.1 SOURCES OF REVENUE ................................................................................................ 25

5.1.1 Principle of Road User Charging ......................................................................... 25 5.1.2 Charges levied on vehicles .................................................................................. 26 5.1.3 Fees levied on road users .................................................................................... 26 5.1.4 Road User penalties ............................................................................................ 27 5.1.5 Penalties assigned to vehicles ............................................................................. 27 5.1.6 Charges levied on use ......................................................................................... 28 5.1.7 Assessment of Road Sector Revenues ............................................................... 28

5.2 THE REQUIREMENTS OF THE ROAD FUND ................................................................ 30

6. THE ANALYSIS ............................................................................................................................. 33 6.1 NETWORK CRITERIA AND ASSUMPTIONS .................................................................. 33 6.2 FINANCIAL CRITERIA AND ASSUMPTIONS ................................................................. 35

6.2.1 State Road Fund Revenue .................................................................................. 35 6.2.2 Other PWD Revenue ........................................................................................... 35

6.3 ANALYSIS RESULTS ....................................................................................................... 37

7. MANAGEMENT OF THE ROAD FUND ........................................................................................ 39 7.1 THE ACT OF ESTABLISHMENT ...................................................................................... 39 7.2 OBJECTIVES OF A ROAD FUND BOARD ...................................................................... 41 7.3 ROAD FUND ADMINISTRATION ..................................................................................... 43 7.4 COMPOSITION OF THE BOARD .................................................................................... 43 7.5 THE ADMINISTRATION OF THE ROAD FUND .............................................................. 44

8. SUMMARY AND CONCLUSIONS ................................................................................................ 46 8.1 ROAD MAINTENANCE..................................................................................................... 46 8.2 ROAD FUND MANAGEMENT .......................................................................................... 46 8.3 THE ROAD FUND REQUIREMENT ................................................................................. 48

9. FOCUS GROUP MEETING ........................................................................................................... 49

10. PRESENTATION TO PROJECT STEERING COMMITTEE ......................................................... 50


February 2008 iii

LIST OF TABLES

Table 1 : The Road Fund Committee .......................................................................................................... 11 Table 2 : Consumption of Motor Spirit [Petrol] and Diesel in Uttar Pradesh ............................................... 12 Table 3 : Estimated UP State Road Fund Revenue .................................................................................. 13 Table 4 : Allocations from the UP State Road Fund [Crores] ..................................................................... 13 Table 5 : Periodic maintenance standards as set for the State .................................................................. 18 Table 6 : PWD identified maintenance expenditure .................................................................................... 19 Table 7 : Major works on core network road sections finance by external funding .................................... 20 Table 8 : Performance Indicators in relation to Standards .......................................................................... 21 Table 9 : Registered Vehicles in Uttar Pradesh .......................................................................................... 23 Table 10 : Revenue generation from motor vehicle taxation ...................................................................... 26 Table 11 : Fees collected by the Transport Department [Rupees Crore] ................................................... 26 Table 12 : Collection of Vehicle User Penalties .......................................................................................... 27 Table 13 : Collection of Vehicle Penalties ................................................................................................... 27 Table 14 : Trade Tax by Type of Automotive Fuel ...................................................................................... 28 Table 15 : Estimate of Road Sector Revenues [Rs Crore] ......................................................................... 29 Table 16 : Estimated ordinary [routine] maintenance costs ........................................................................ 31 Table 17 : Estimated periodic maintenance costs ...................................................................................... 31 Table 18 : Cost per kilometer for Strengthening ......................................................................................... 32 Table 19 : Cost per kilometer for Holding works ......................................................................................... 32 Table 20 : Model input parameters ............................................................................................................. 33 Table 21 : Externally funded works programmes ....................................................................................... 34 Table 22 : Breakdown of PWD budget ........................................................................................................ 36 Table 23 : Estimate of funding requirements for PWD road maintenance and strengthening programme 38 Table 24 : Details of Act of Establishment .................................................................................................. 39

ANNEXURES

Annexure - A : Established Road Funds in Africa

Annexure - B : Government of Uttar Pradesh, Public Works Department, Section-1m Notification, January 1, 2000

Annexure - C : Government of Uttar Pradesh, Public Works Section-1, No.1424/23-1-02--25CG/97TC-4, Lucknow, Dated-May13, 2002

Annexure - D : Vehicle Tax Table – Department of Transport

Annexure - E : Road Transport Fees – Department of Transport


February 2008 1

1. INTRODUCTION

1.1 THE IDS REPORT

The Policy and Institutional Development Study (IDS), conducted by TCE Consulting Engineers Ltd in 2002, undertook a review of sustainable road network funding and it was their concern, at that time that, over the initial years there would be a funding gap. On the basis of this concern tax increases were recommended. Following a review by the Department it was proposed that a cross State study be undertaken of taxes and levies in order to develop proposals for revised road related taxes/surcharges to enhance financial resources.

1.2 THE ISAP TA PROJECT

The Terms of Reference for the TA are given below. The purpose of this report, as defined by the TOR for the project requires that this report should examine;

“Implementation of GOUP Decisions on revised taxes / surcharges for Road Fund”

Thus, the basis for this report was clearly to be a review of the comparative multi state study [to be executed by PWD and the Transport Department] on road related taxes, levies and surcharges, the recommendations of the study and, the implementation programme. Based on this being completed it was then given that ISAP would be in a position to advise and assist in the implementation which could then be monitored and reported upon within this report.

Terms of Reference for the TA

Objective Decisions already taken Progress Action Required

1D Adequate and sustainable UP Road Funding

GoUP agreement to review Road Fund revenue scope, including access to vehicle tax and vehicle insurance surcharges

GoUP request for cross State study of road related taxes and levies Increased road funding being pursued in 10th Plan process

1. PWD & Transport Department to formulate and implement comparative study – October 2002

2. Implementation of GoUP decisions on revised taxes / surcharges for Road Fund – March 2003

1E Effective sector participation in UP roads financing & management

GoUP agreement, post IDS to widen membership of UP Road Fund Management Committee [RFMC]

GoUP ‘in principle’ agreement to enhance workings of RFMC

3. Finalise GoUP decision on new RFMC nominees – April 2002

4. Implement GoUP decisions on outcomes of consultative study on enhanced RFMC role/s, resources and processes – March 2003

5. Inaugurate annual stakeholder Road Forum to review road sector performance – June 2003


February 2008 2

Whilst it continued to be noted, as late as June 2007, that PWD and the Transport Department should execute a comparative multi-state study, in the event this has not been undertaken. It is to be noted, however, that actions [3] and [4] have been implemented.

Given that both a comparative study and recommendations on road related taxes, levies and surcharges still remains unavailable, it has therefore been necessary to adjust the content of this report.

This report therefore sets out to review Road Funds in general and then looks at funding requirements within the State of UP. This is followed by a review of the current sources of revenue for the Road Fund [RF] and overall road sector revenues. Based on this review, funds are matched against requirements and a review of the necessary funding and recommendations in respect to such are given. A review of the management, operation and procedures of the UP RF are also given.


February 2008 3

2. ROAD FUNDS – A BACKGROUND

2.1 INTRODUCTION

The purpose of this section is to review both international and national experience concerning the creation of Road Funds.

Road expenditures generally fall into five categories namely: construction, rehabilitation, periodic maintenance, routine maintenance and operational management. The first two can be classified as capital expenditures and are often financed through borrowing with the last three being classified as current expenditures. These latter three expenditures are generally financed in a number of ways, such as through;

• General taxation with the tax revenue being collected by various government departments and then distributed, for spending purposes, throughout all departments by way of the budgetary process.

• Earmarked taxes are considered to be general or special taxes that are levied to either support, or fund in full, any specifically identified expenditure items.

• Tolls are a direct means of charging for use and in the case of roads can affect economic behaviour in the same manner as the price level of a good.

A RF is an institutional mechanism which allows selected revenues to be placed at the disposal of the road department/agency with these being outside the general budgetary reviews and procedures. Whilst in the past road funds have been abandoned as they were unable to supply an acceptable and/or stable flow of funds, more recently this has changed with the introduction of what has been described as "second generation Road Funds".

These are generally funded by either a levy or a surcharge which can best be termed as a ‘user charge’ and separate from general taxation. These revenues are then paid directly into the RF which is managed by a Board comprising stakeholders within the transport sector. Their job is to administer the fund and determine the level of charges and their distribution in terms of expenditures to be funded. In terms of funding by the RF, the most difficult issues are that of the determination of the network that falls within the domain of the fund and, the elements of ‘road works’ that should be supported by the fund.

2.2 EXPERIENCE OF ROAD FUNDS

Experience with Road Funds (referred to as the “first generation” Funds) has not been entirely satisfactory. These types of RF were set up as an item within the national budget and represented direct ‘earmarking’ of government revenues to finance a service [administered and delivered by government departments] and allocated according to pre-defined priorities. These often did not achieve their goals due to poor governance, collection and disbursement and, inadequate contribution to the fund for yearly maintenance of the road network.


February 2008 4

Awareness about the importance of road maintenance has thus resulted in programmes being developed to initiate actions necessary for the management and financing of roads on a sustainable long-term basis. As part of this development, “second generation” Road Funds emerged. These second generation road funds were developed to support the commercialisation of road management, whilst increasing the domestic resources available for road maintenance. They were also designed to increase efficiency of resource allocation and use.

These dedicated, "second generation Road Funds" now being implemented, have the institutional arrangements in place that allow for a degree of autonomy in both management and private sector participation. They are generally considered to be more ‘commercially’ operated, are to be found in Europe, Africa and Asia and, have been in operation since the early 1990’s. In the situation where the budgetary system functions well, however, there is clearly no need for the provision of non budget funds or ‘earmarking’.

In the past there has been much discussion concerning the merits of ‘earmarking’ funds for any specific sector. The committing and earmarking of specific taxes to fund road sector maintenance and improvements, however, does exhibit a commitment on the part of Government even though these funds may well continue to be treated as a part of overall government revenues and therefore run the risk of being allocated to other purposes should the Government run into financial difficulties. The second generation funds that have more recently been established, especially in Africa, do, however, exhibit a measure of sustainability. The revenues for such funds are being generated by user charges in the form of levies, surcharges and taxes, with the application of being generally in the areas of licence fees, levies on fuel, and tolls.

2.3 INTERNATIONAL EXAMPLES

For this exercise, examples have been reviewed of “second generation” Road Funds that have been implemented in Africa [see Annexure A], in terms of the key factors concerning their establishment. Details of the revenues collected, and actual performance of the funds, are not given.

Box 1 Elements of Second Generation Road Funds

Structure

• Clearly defined legal executive powers of user dominated Roads Board

• Roads Board to serve as procurer of services rather than as service provider

• RF Management Board the representative of consumer interests and run according to sound business practices

• Governance free from political interference • Autonomous road agencies delivering on a performance

basis under hard budgetary constraints

Process

• Funded by levies or surcharges as user charges and identified separately from general taxation; revenues paid directly into a fund managed by a [Roads] Board

• Guaranteed security of assigned revenue streams and designated allocation of expenditures

• The Roads Boards focus on road financing management [setting up of a level of road fee, allocating procedures of the dedicated revenues, selecting expenditure priorities based on economic analysis rather than the provision of road works and services

• Independent monitoring of performance for flow of funds; and the quantity, quality and cost of road works


February 2008 5

2.4 KEY LESSONS LEARNED

In identifying the details of each of the funds and reviewing their operation, the following points have been noted.

The funding for maintenance, whilst this has tended to show consistent increases across the board, it would appear that in general funding still continues to fall short of total requirements.

The Road Fund Boards, by their very autonomy and ‘makeup’, have tended to provide effective management, accountability, transparency and, increased awareness of maintenance needs, which may in the future, lead to greater efficiency in the road sector.

Whilst the establishment of a dedicated means of maintenance financing is accepted as a necessary requirement, it is clear that its implementation alone cannot be considered to be a sufficient condition to ensure a sustainable base for road maintenance. It is also necessary to ensure that;

• political commitment is established to safeguard the use of the fund

• the system of governance provides ‘checks and balances’, in order that governments discretionary powers and arbitrary use of funds can be restricted.

• the total aggregated resources available are sufficient for the network assigned.

• the road user charges levied for the use of the roads are based on the maintenance ‘need’ of the network.

• RF boards must be empowered to both define and enforce contractual agreements;

• RF boards must include diverse interest groups to ensure equitable distribution of resources;

• there should be a clear allocation of responsibility between the RF Board and government roads departments, and;

• the road administration has the capacity to carry out the identified maintenance works both efficiently and effectively.

Whilst the quality of the primary networks would appear to be improving, the feeder and rural networks continue to be deteriorating. This appears to be primarily a result of inadequate planning, programming, finance and, the lack of capacity to carry out the high volume of works necessary that has resulted from many years of neglect.

It is clear that the raising of revenue through road user charges should, in the medium term, take due account of contactor capacity and not just identified maintenance expenditure needs.

It is necessary that Road Fund Boards be;

• supported by a legal framework for the determination of user fees and expenditures,

• capable of developing a sustainable finance strategy based on road user charges

• capable of presenting to government, as well as convincing government, of the need and requirement for the raising of road user charges to meet road maintenance needs


February 2008 6

It has been seen that improved contract management and disbursement arrangements can have an impact on road maintenance costs per kilometre. In addition, auditing should involve the continuous financial, physical and technical audit of projects in progress rather than being left to just a technical ‘after the event’ audits.

It is also necessary that the RF Board should establish a creditable auditing process to monitor the quantity and quality of work and ensure transparency and accountability in the use of road maintenance funds which have been derived from the road user. This may mean the introduction of independent private sector auditing.

It is also clear that the allocation of funds for road maintenance should be based on condition and not just on standard procedures and formulae of the road administration.

The absence of detailed historic and current data on road condition is clearly an obstacle for the establishment, with any degree of confidence, of road improvement requirements. It is therefore essential that a system(s) be developed, implemented and, maintained, that can provide an up to date inventory and condition status of the road network.

2.5 EXAMPLES FROM INDIA

With the growing recognition that the allocation of insufficient funds for maintenance is non sustainable, India has also been moving forward with the creation of “second generation funds” at both the Central and State Government levels. Initiatives have also taken place in the area of private financing for highway projects, whereby a concession is given which ensures the optimum operation and maintenance of a highway over the concession period, following which the asset is returned to the State. Toll based maintenance is also another area currently being explored. Both these ensure a quality of service to the road user whilst minimizing the requirement for ‘up front’ capital finance for both provision and maintenance of road infrastructure. Even at the local level, the levying of a cess on agricultural produce is being used for maintenance of rural roads. Efforts in the area of institutional arrangements for the proper planning of maintenance interventions are also being strengthened.

Roads represent an extremely important asset within the transport sector of India, with the country having one of the largest networks in the world. Given that the current replacement cost of these assets would be staggering, and that these assets will deteriorate through ‘wear & tear’, as well as through general weathering and the passage of time, it is therefore clear that the loss in asset value due to such should be minimised. Road assets, like any other asset, must be maintained.

In the past road maintenance has generally suffered from shortages of financial resources and the general allocation of low priority, in comparison to that of capacity expansion and all weather road construction. With maintenance generally being considered a ‘Non Plan’ activity it is therefore not surprising that with budget allocations being cut due to fiscal shortages maintenance is often cut or postponed in the hope of a better fiscal climate in the future. It is therefore in the light of such maintenance budget cuts and maintenance deferment that the earmarking of road funds to ensure a stable/sustainable flow of funds has become a popular concept.


February 2008 7

2.5.1 The Central Government Road Fund of the Government of India

The Central Road Fund has been in existence since the late 1920’s with the revenue for the fund being generated through a levy exclusively on petrol. This remained the case until 1998 whereupon Government levied an additional excise duty of one Rupee per litre1 on petrol and dedicate the proceeds to the road sector, with high-speed diesel also becoming subject to this duty in the following year. The Central Road Fund was then revamped and this, plus the description of the management of the fund, was detailed in the provisions of the Central Road Fund Act, 2000. Under this Act, the distribution of the revenues accruing to the fund are as specified below:

(a) 50 per cent of the cess on high-speed diesel is to be dedicated for the development of rural roads;

(b) The remaining 50 per cent of the cess on high-speed diesel and the entire cess from petrol to is to be distributed as follows:

(i) 57.5 per cent for development and maintenance of national highways;

(ii) 12.5 per cent for construction of bridges for road over/under railways and, the provision of safety measures at unmanned rail crossings;

(iii) 30 per cent for the development and maintenance of State roads with 10 per cent of this amount being kept as a reserve for the implementation of road schemes that have interstate and/or economic importance.

The Central Road Fund Act, in addition to development of the network, also provides for the maintenance of national and state highways but excluding rural roads. However, currently the proceeds of the fund are primarily used for:

• Capacity expansion of selected National Highways,

• Improvement of State Highways and,

• The provision of all-weather access roads to settlements with populations in excess of 500 persons, this being 250 persons in the case of hilly, desert and tribal areas.

2.5.2 The Kerala Road Fund

The Kerala Road Fund was created in 2001 with the objective of mobilising non-budgetary resources for the development and maintenance of the State road network. The important features of the fund as given in the act are identified below;

1 At present, the current cess on petrol and diesel is two Rupees per litre. This was increased from one Rupee to one and a half Rupees in 2004 followed by a further half a Rupee increase in 2005. The last increase of half a Rupee has been ‘earmarked’ for National Highways only.


February 2008 8

Legal position: The fund was created to demonstrate PWD commitment to the development and maintenance of the network and as a means to mobilise both the necessary non budgetary funds and resources [user charges, private sector involvement and external funding] to meet this commitment.

Purpose: To finance:

• Routine and periodic maintenance of PWD managed roads;

• Development of the existing road network through the upgrading of existing PWD maintained roads;

• Construction of new roads where required;

• Implementation of safety projects as deemed necessary;

• Implementation of research as this relates to road maintenance and development;

• Application of cost sharing in association with donor-funded projects being undertaken in line with the above

Sources of funding: The Road Fund comprises all:

• funds received from the central Government, Central Road Fund;

• contributions made by the State Government;

• fees, fines and other revenues collected by the State Government in accord with the provisions of the Kerala Highway Protection Act, 1999;

• payments made by a concessionaire for a transport project in accord with the concession agreement;

• funds credited to the Bridge Fund established under section 12 of the Kerala Tolls Act, 1976;

• user fees collected by any Government agency or statutory body under the Kerala Road Fund Act;

• grants, loans or advances for roads made by the Central Government of India, the Government of Kerala or any other institution;

• returns on any investments that are made by the Board of the Road Fund either directly, through a government agency or, statutory body;

• amounts borrowed directly by the Board of the Road Fund;

• other amounts that are authorised for the credit of the Fund under the provisions of the Road Fund Act or any rules made there under or any other law in force at the time;

• Every year, the Government will credit to the Fund an amount equal to 10 per cent of the tax collected in the previous year under the provisions of the Kerala Motor Vehicles Taxation Act, 1976,


February 2008 9

Projects: Projects implemented under the Road Fund can be taken up in association with private entrepreneurs, or financing institutions, on a cost/benefit sharing basis. If proposed projects are unlikely to attract private participation, as they do not exhibit a sufficient financial return, then incentives in the form of the sharing of costs can be given.

Management: The Board shall comprise the following members:

• Chief Minister, ex officio, who shall be the Chairman of the Board,

• Minister in charge of Public Works, ex officio, who shall be the Vice-Chairman of the Board,

• Minister in charge of Finance, ex officio,

• Minister in charge of Transport, ex officio,

• Principal Secretary to the Government in charge of the Public Works Department, ex officio, who shall also be the Secretary to the Board,

• Law Secretary, ex officio,

• Chief Engineer, Roads and Bridges, ex officio,

• Three persons nominated by the Government from amongst the heads of financial institutions engaged in the business of infrastructure, scheduled banks or technical or engineering personnel working in national level institutions,

There is also an executive committee comprising:

(a) The Minister in charge of Public Works (Chairman of the Executive Committee),

(b) The Principal Secretary to the Government in charge of the Public Works Department (Vice Chairman of the executive committee),

(c) Finance Secretary to Government,

(d) Law Secretary,

(e) Chief Engineer, Roads & Bridges, and,

(f) Two members nominated by the Board from among the nominated members of the Board.

2.5.3 Madhya Pradesh

The state of Madhya Pradesh has created Kisan Sadak Nidhi (farmer’s road fund) which is an earmarked fund for improving and maintaining Major District, Other District and Village Roads. The source of the funds is the Mandi (market) cess on the sales of agricultural produce. Some 85 per cent of the cess is earmarked for the improvement and maintenance of these roads. The total amount to be derived from the cess has been estimated as between Rs 100 and Rs 120 crore per annum. In the recent past this fund has been used for construction and upgrading of existing roads


February 2008 10

2.5.4 Karnataka

The state of Karnataka recently created a dedicated fund for rehabilitation and maintenance of rural roads, called the Chief Minister’s Grameen Raste Abhivrudhi Nidhi (CMGRAN). An amount of Rs 300,000 per km for periodic renewal and Rs 40,000 per km per year for routine maintenance for black-top rural roads has been allocated to the Zilla Parishads (district-level local bodies). For water-bound macadam and gravel roads, the norms for routine maintenance have been set at Rs 25,000 and Rs 20,000 per km per year respectively. This scheme is attempting to protect the investment made in the development of rural roads within the state.


February 2008 11

3. THE SITUATION IN UTTAR PRADESH

3.1 INTRODUCTION

The RF in UP was established in 1998. Under the 1998 UP Road Development Policy it is clearly stated that the Fund should be utilised for road maintenance works within the State. As a part of its Act of establishment in 20002 [see Annexure B], a fifteen member Road Fund Committee was created [which was later amended to twenty two members – see Annexure C], with the requirement to advise and manage the road fund. The committee currently comprises the membership as shown in Table 1.

Table 1 : The Road Fund Committee

No. Designation No. Position

1 Minister PWD 1 Chairman

2 Minister of State 1 Vice Chairman

3 MP’s nominated by State Government 2 Member

4 MLA nominated by State Government 2 Member

5 Zila Panchayat President nominated by State Government 2 Member

6 Commissioner Agricultural produce 1 Member

7 Principal Secretary/Secretary, Industrial Development Dept 1 Member

8 Principal Secretary PWD 1 Member

9 Principal Secretary Finance Department 1 Member

10 Principal Secretary Transport Department 1 Member

11 Principal Secretary Tourism Department 1 Member

12 President/Secretary, of State Truck Operators Association 1 Member

13 President/Secretary, of Motor Bus Association 1 Member

14 MD [or his nominee], Society of Indian Automobile Manufacturers, Delhi 1 Member

15 Chief representative [Delhi] of the Travel Agents Association of India, Mumbai 1 Member

16 Assistant Manager of Oriental Insurance Company, Lucknow 1 Member

17 Director of Confederation of Indian Industries [CII], UP Chapter Lucknow 1 Member

18 Co-ordinator of Road Safety Centre, Central Institute of Road Transport, Pune 1 Member

19 Engineer in Chief PWD 1 Member

TOTAL Committee Membership 22

2 Circular No 5059/23-1-99-25 CG/97TC-4 , 01/01/2000


February 2008 12

3.2 FUNDING OF THE ROAD FUND

Revenue for the Consolidated RF is generated through a levy on fuel. Trade Tax on fuel, prior to the establishment of the RF in 1998, was 14% on petrol and 16% on diesel. This was increased to 20% for both fuels with the marginal increase to be allocated to the RF. It is noted that in August 20043, Trade Tax on Motor Spirit [Petrol] and Diesel was increased to 21%, followed by a further increase on Motor Spirit alone to 25% in November 20044. No change is recorded for the marginal RF levy on automotive fuels and this appears to have remained at 6% for Petrol and 4% for Diesel.

In Table 2 the consumption of Diesel and Petrol within the State of Uttar Pradesh is given for the period 1998 to 2006 and in Table 3 an estimate is given of the proceeds from the levy of the 6% and 4% marginal Trade Tax on petrol and diesel, which is payable to the UP State Road Fund.

Table 2 : Consumption of Motor Spirit [Petrol] and Diesel in Uttar Pradesh

Year Tonnes [000's] Litres

Petrol Diesel CNG Petrol Diesel CNG

1997 to 1998 431 4,362 na 597,150,500 5,055,558,000 -

1998 to 1999 463 4,433 na 641,486,500 5,137,847,000 -

1999 to 2000 493 4,856 na 683,051,500 5,628,104,000 -

2000 to 2001 585 4,632 na 810,517,500 5,368,488,000 -

2001 to 2002 567 4,073 na 785,578,500 4,720,607,000 -

2002 to 2003 634 4,235 na 878,407,000 4,908,365,000 -

2003 to 2004 673 4,208 na 932,441,500 4,877,072,000 -

2004 to 2005 712 4,289 na 986,476,000 4,970,951,000 -

2005 to 2006 751 4,344 na 1,040,510,500 5,034,696,000 -

Note : Conversion [Petrol] 1,366 litres and [Diesel] 1,159 litres per Metric Tonne – Based on oil industry conversion factors assuming an ambient temperature of 86oF or 30oC

Source : IndiaStat.Com

3 Government Notification KA.NI.2-2059/XI-9(203)92-U.P. Act 15-48-Order (24)-2004 …. 03rd August 2004 4 Government Notification KA.NI.2-3433/XI-9(203)92-U.P. Act 15-48-Order (24)-2004 …. 25th November 2004


February 2008 13

Table 3 : Estimated UP State Road Fund Revenue

Year Average price per litre Tax Revenue per Litre Total Tax Revenue TOTAL

[Crore] Petrol Diesel CNG Petrol Diesel CNG Petrol Diesel CNG

1998 to 1999 28.23 11.72 - 1.362 0.357 - 873,439,690 1,835,215,883 - 270.87

1999 to 2000 28.88 16.00 - 1.394 0.500 - 952,199,264 2,814,591,114 - 376.68

2000 to 2001 30.50 18.48 - 1.475 0.583 - 1,195,645,413 3,128,764,324 - 432.44

2001 to 2002 30.20 19.22 - 1.460 0.607 - 1,146,859,976 2,866,687,727 - 401.35

2002 to 2003 33.44 21.62 - 1.622 0.687 - 1,424,902,334 3,373,447,441 - 479.83

2003 to 2004 37.78 25.22 - 1.814 0.988 - 1,691,259,559 4,820,757,664 - 651.20

2004 to 2005 42.64 30.46 - 1.951 1.176 - 1,924,503,275 5,845,354,710 - 776.99

2005 to 2006 48.37 34.23 - 2.226 1.332 - 2,315,926,650 6,705,299,673 - 902.12

Source : Prices based on the Wholesale Price Index – Office of the Economic Advisor, Ministry of Commerce & Industry, Delhi and Consultants estimate

In the above Tables an estimate of the revenues generated by the marginal tax on automotive fuels has been made. It should be borne in mind that this is an estimate and is based on an average price for fuel over the year and will not reflect possible monthly variations in fuel price which may have an impact on Tax revenue. In Table 4 a comparison is shown between the estimated funds, shown above, with the funds actually passed on to the RFMC from the RF and then on to PWD.

Table 4 : Allocations from the UP State Road Fund [Crores]

Automotive Fuel Type 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007

TOTAL [from Table 3] 432.44 401.35 479.83 651.2 776.99 902.12 1,165.00*

Cumulative TOTAL 432.44 833.79 1,313.62 1,964.82 2,741.81 3,643.93 4,808.93

SRF Budget Amounts PWD ** 0 221 230 300 480 742 1,458

Cumulative Budget Amounts 0 221 451 751 1,231 1,973 3,431

Source : * Consultants estimate based on polynomial trend extrapolation

** PWD Expenditure & Budget released amounts for Grants 56, 58 and 83

As can be seen the budgeted amounts, as provided by PWD and from the minutes of the RF meetings, indicate an almost 50% annual increase in the budget allocation from the RF. The estimate of the annual amount available from the marginal Trade Tax on automotive fuels, calculated from the sales of fuel, indicates that there would appear to have been surplus funds available from the RF for each year, except in 2007. Unfortunately, it has not been possible to obtain the audited accounts of the RF nor the actual amounts and disbursements from the Tax Commissioner to verify this.


February 2008 14

In the case of CNG it is understood that the current Trade Tax on this fuel is 10% although it is muted that this is to be increased5 to 12.5%. It should be noted that whilst CNG is an automotive fuel that is experiencing a significant increase in use, especially by auto-rickshaws and buses, there is apparently no allocation of this road user charge to the RF.

3.3 THE STATE ROAD FUND MANAGEMENT COMMITTEE [SRFMC] The RFMC has no executive powers and acts purely in an advisory role. As an advisory committee it can only recommend the level of funds that should be allocated for a works intervention and for which road sections. As an advisory body, its recommendations can be over-ruled by the State executive. It appears from the minutes of the meetings of the committee that they meet annually to agree the assignment of funds to projects.

5 Hindustan Times, Thursday 6th September 2007


February 2008 15

4. DEVELOPING A PROGRAMME

4.1 INTRODUCTION It has already been noted that;

“3.3 A road fund for the maintenance of roads in the State has been created the accruals from the increase in the rate of Trade Tax on Diesel and Petrol will be credited to this fund.” [Uttar Pradesh Road Development Policy 1998]

This is a clear policy statement that identifies road maintenance activities within the State as the recipient for the accruals to the State Road Fund. As such it is therefore important to identify the works activities to which this should refer.

4.2 THE CASE FOR ROAD MAINTENANCE Roads and road transport make an important contribution to both, the economic growth and development as well as acting as the catalyst in the bringing about of other important social benefits, such as poverty reduction. With this in mind, a road network is considered sustainable when it is in a satisfactory condition and does not, as a whole, deteriorate over time. However, roads do not remain static and pass through a cycle of increasing roughness until such time as they require to be restored to their original condition with rehabilitation work. Road deterioration is primarily due to the accumulation of damage caused by the passage of vehicles, although environmental effects can also contribute. During this cycle a road will experience annual routine maintenance and also less frequent maintenance interventions classified as periodic maintenance. A well maintained network can therefore be classified as a sustainable network.

Maintenance can therefore be deemed to include those works or activities that preserve the riding qualities, safety characteristics, functional serviceability and structural integrity of the facilities that comprise a road. The goal of such maintenance is to preserve the asset, not to upgrade it.

Delays in maintenance interventions can not only have direct cost impacts, wherein delayed maintenance intervention results in higher and more expensive treatments being required, but also in terms of indirect costs. As a road deteriorates vehicle operating costs increase thus increasing the burden on the economy. Neglected or badly maintained roads can also affect economic development with potential entrepreneurs seeking other locations where the service provided by the roads network is better. Some of the more tangible benefits of timely road maintenance, in all its forms, can therefore be summarised as follows;

• The prolonging of the serviceable life of road infrastructure,

• The reduction in the rate of pavement deterioration,

• The reduction of vehicle operating costs,

• Reduction of environmental damage caused from increased fuel consumption,

• A reduction in the rate of accidents,

• Provision of all weather roads,

• Reduction in the need for large capital outlays for road reconstruction and/or rehabilitation.


February 2008 16

The basic goal of road maintenance interventions can therefore be broadly summed up as the protection of the asset with the objective of minimising life cycle costs for all road components consistent with achieving a specific standard of performance.

4.3 MAINTENANCE CATEGORIES Maintenance operations can be categorised into Routine and Periodic and, in some cases, “Emergency Repairs”. Road users normally judge the quality of a road, and by inference, the effectiveness of maintenance, on the basis of the quality of the ‘ride’ and, to a lesser degree, the appearance. The quality of the ‘ride’ or ‘comfort’ with which a user can travel, and the attenuating speed that can be both safely and legally achieved, will therefore be important criteria for maintenance. A number of maintenance activities all have a valuable contribution to the enhancement of the users comfort, safety and speed of travel.

The balancing of routine maintenance activities along with a regular programme of periodic maintenance - plus prompt response to emergencies – must therefore form the basis of any effective maintenance programme. The main activities that come under each of these maintenance interventions are identified below.

4.4 ROUTINE MAINTENANCE Routine maintenance comprises small-scale work, which is conducted on a regular basis, with the aim of ensuring “ …. the daily passability and safety of existing roads in the short-run and to prevent premature deterioration of the roads” (PIARC 1994). Routine maintenance works are generally planned and performed on a routine/regular basis and are aimed at preserving the condition of the highway and/or, are in direct response to specific conditions, and are directed towards the restoring of the highway system to an adequate level of service.

In general, routine maintenance therefore covers those activities required to be carried out once or more per year and are typically small scale or simple, but probably widely dispersed, and generally require unskilled labour under the supervision of a skilled person. To a large degree the need for these activities can be estimated and planned beforehand and can often be carried out on a regular basis. Such activities can include;

• minor carriageway repairs (including pothole repair, patching, crack sealing, crack filling, restoration and repair of localised failed areas of pavement);

• maintenance of verges, grass cutting;

• reshaping, grading, dragging of unpaved surfaces;

• gully emptying;

• treatment of weeds;

• pruning/lopping of overhanging tree branches, cutting of trees and general tree maintenance;

• repainting and maintenance of road markings;

• repair and cleaning of road signs and kilometre stones;

• maintenance of highway drainage and cleaning/excavating of ditches and drains;


February 2008 17

• cleaning of culverts (cross water drains), inlets and outlets;

• replacement and repair of ‘cats eyes’ and road studs;

• repair/replacement and maintenance of road kerbstones, channels and ditches;

• repair/replacement of crash barriers;

• repair to medians, footpaths, street lights;

• minor repair to culverts, flyovers, subways, retaining walls;

• bridge maintenance: attendance to bearings, joints, wearing coat, railings, clearance of weeds and minor repairs to sub/super structure;

• maintenance of arboriculture in the right of way;

• repair of erosion damage and erosion control measures;

• emergency work, such as the removal of fallen trees, litter, debris, dead animals or other objects and, the keeping of the road clear of debris;

• reporting of major damage to the road.

4.5 PERIODIC MAINTENANCE Periodic maintenance covers those activities undertaken on a road section at regular but relatively long intervals, the aim of which is the preservation of the structural integrity of the road. Such activities are generally undertaken at intervals of several years. This category of work excludes works that change the geometry of a road by way of widening or realignment.

Works interventions would cover; resurfacing and overlay works carried out in response to measured deterioration in road conditions. Given the regular, but relatively long time intervals between interventions, such works can be both budgeted and planned for on a regular basis.

Such maintenance interventions tend to be large scale and generally require specialised equipment and skilled personnel. The cost of such work is also far greater than for routine maintenance and will require both identification and planning and, importantly, may also require design.

4.6 EMERGENCY REPAIRS/MAINTENANCE Emergency repairs or maintenance works are those that have not been foreseen but, importantly, require immediate attention. Such works are generally required following events typified as force maejure, such as; flood damage, major landslides or damage to structures, etc. Clearly such instances cannot be budgeted or planned for, but, it is necessary to reserve a portion of the maintenance budget for such eventualities.

4.7 WORKS INTERVENTION PRIORITIES Routine maintenance is normally given priority over periodic maintenance given that it keeps overall road management costs low and preserves the benefits attributable to roads. Routine maintenance, or preventative activities, should start immediately after the completion of construction or renewal of a section of road and not when the first defects appear.


February 2008 18

Typically, road users and policy makers base their judgment of the quality of a road, and the effectiveness of maintenance, on the quality of the road surface i.e. whether there are potholes and how smooth the surface is. While these aspects are important, routine maintenance activities which, for example, keep the drainage system open, are equally critical and deserve even higher priority in order to prevent the structural damage to roads.

Seasonal priorities are usually established for routine maintenance activities in order to cater for changing requirements and to ensure that resources are used efficiently and effectively. In this regard it is therefore essential the condition of roads be regularly assessed in order that activities can be planned to effectively respond to particular requirements. In India, apart from the widely varying terrain and traffic conditions, routine and emergency repair/maintenance activities should take account of the typical seasonal pattern of heavy rainfall in the monsoons and the prolonged dry spell thereafter.

4.8 CURRENT ROAD MAINTENANCE AND STANDARDS As identified above, there are basically two types of maintenance that need to be considered, namely Routine and Periodic where in general, routine represents an annual expenditure for minor items such as grass cutting, pothole repairs and patching etc., and periodic, the provision of an overlay.

In the case of Routine maintenance, PWD considers this to be ordinary repairs involving work both on and off the carriageway. In terms of ‘on carriageway’ work this includes; repairing of potholes, sealing of cracks and the grading of shoulders, whilst ‘off carriageway’ work includes, cleaning of culverts and ditches, repairing/replacing road signs and kilometre stones and, the clearing of roadside vegetation. Routine maintenance also includes the undertaking of minor repairs on bridges and other structures. It is understood that these works are generally carried out by departmental labour.

In the case of Periodic maintenance, the standards adopted over the years for what PWD term as the renewal length of a highway [periodic maintenance], has been identified as shown in Table 5 :

Table 5 : Periodic maintenance standards as set for the State

Date National Highways

State Highways

Major District Roads

Other District Roads Village Roads

1972 to 1998 One Third One Fifth One Sixth One Seventh One Eighth

1998 to 2003 One Third One Fifth One Sixth One Eighth One Eighth

2004 to date One Third One Quarter One Quarter One Fifth One Sixth

Note : Prior to 1972 condition rather than renewal cycle was used as the required parameter for the identification of periodic maintenance requirements.

Source : PWD


February 2008 19

However, the renewal cycle that has been established takes no cognisance of the condition of the road and the renewal, or as might better be termed periodic maintenance, is therefore a time rather than condition based intervention. As such a road will ostensibly receive a renewal treatment irrespective as to whether or not it is required. In addition, the intervention applied may not be adequate for the condition that exists. Clearly this is not an efficient or effective use of scarce monetary resources and it would therefore be strongly recommended that, at minimum, an annual post monsoon condition survey be put in place to ascertain the condition of the network and the periodic maintenance requirements.

In Table 6 the PWD expenditures for maintenance are shown with the corresponding kilometerage to which they relate.

Table 6 : PWD identified maintenance expenditure

General Maintenance Renewal Special Repair

Physical Progress

kms

Expenditure Crore

Cost Rs per

km

Physical Progress

kms Expenditure

Crore Cost per

km Physical Progress

kms Expenditure

Crore Cost per

km

2004/2005 15,500 65.00 41,935 6,600 225.00 340,909 4,318 301.00 697,081

2005/2006 23,260 102.00 43,852 6,300 115.00 182,539 3,300 430.00 1,303,030

2006/2007 26,500 54.00 20,377 20,658 761.00 363,380 3,500 325.00 928,571

2007/2008 25,000 139.00 55,600 12,000 100.00 83,333 30,000 1,000.00 333,333

Source : PWD

In the case of the heading “general maintenance” which can be related to what has been described as routine maintenance, apart from a 50% reduction in the cost per kilometre in financial year 2006/07, the expenditure per kilometre has tended to rise. However, of more importance is “renewals” or what has been termed periodic maintenance. Whilst it might be expected that the number of kilometres may vary from year to year the data shown appears to indicate significant changes. Given that a fixed term or cycle for renewals is given [see Table 5] such fluctuations should not be so dramatic. Similarly the cost per kilometre variations year on year would also appear significant.

Finally, there are “special repairs” which can be considered to relate to emergency repairs as detailed above. This can, and does show, large variations in both kilometres, cost and, cost per kilometre, as this relates purely to works that have not been programmed and which are, as their name implies, emergency in nature. Nevertheless, the identification of 30,000 kilometres for the financial year 2007/08 is worrying albeit the kilometre cost is significantly below that of previous years.

It is also important to identify here the work that has been carried out with external funding as this, when completed will immediately require to be placed in the routine maintenance programme, with periodic maintenance being planned for a future date. In total this relates to works carried out under an ADB loan which comprised 184.3 kms of State Highway [Varanasi to Satinagar] and the work undertaken under the World Bank project, known as SRP I & II. The works have generally involved major maintenance and / or strengthening, reconstruction / rehabilitation of sections of the core network. The relevant details are shown in Table 7.


February 2008 20

Table 7 : Major works on core network road sections finance by external funding

Highway Kilometres Completed

2000 2001 2002 2003 2004 2005 2006 2007 2008

State Highways 184.30* - - 604.00 353.14 283.30 77.00 643.56 794.16

Major District Roads - - - - - 5.80 46.30 30.62 134.94

Other District Roads - - - - - - - 11.00 -

TOTAL 184.30 - - 604.00 353.14 289.10 113.30 685.18 929.10

Note : * This is an ADB project [Varanasi to Satinagar Road] completed in 1998 but shown as completed in 2000 for the purpose of the analysis

Source : PWD

4.9 ESTABLISHING ROAD MAINTENANCE STANDARDS The Indian Road Congress [IRC] prepared a report entitled “Report of the Committee on Norms for Maintenance of Roads in India”. This document provides recommendations on the funding of maintenance for various categories of road and for different traffic levels. It is also appreciative that in general roads in India are not being maintained to the desired “Level of Service” [LOS]. Furthermore it also recognises that road users, road agencies, central Government and State Governments may all have different perceptions as to what an adequate level of maintenance is, given that clear definitions of standards are lacking.

With the recent development of Performance Based Maintenance Contracts [PBMC] in a large number of countries, world wide, it has become necessary to develop objective parameters for the standard of maintenance. Earlier, the standard of maintenance may have been expressed in terms of the frequency of a maintenance intervention, for example, the number of years between the resealing of a paved road under PBMC, however, the required maintenance standard would be identified through the objective and measurable parameters termed “Performance Indicators”6.

The term LOS comes closest to any maintenance standard as perceived by road users in that it characterises road user satisfaction in terms of the quality of the service provided. The criteria that defines LOS is, moreover, related to measurable items such as roughness or the nature of any road surface damage. The principal performance indicators most widely used are;

• Roughness [IRI] mm/m

• Rutting mm

• Percentage of cracking

• Number of potholes per/km

6 Under PBMC payments to the contractor are specifically linked to the contractor meeting/exceeding clearly laid down and defined minimum performance indicators. Under traditional contractual methods however, the road agency would specify workmanship, materials and quantities to be used, plus the time period in which the maintenance is to be done. Payment of the contractor would then be based on inputs, such as; cubic metres of asphalt, number of potholes patched etc.


February 2008 21

The IRC Committee on Norms, in discussing funding and competing demands for funds from other sectors, recommended that maintenance standards be set with the intention of raising the level of maintenance. It nevertheless accepted that it was unlikely that a standard could currently be met that would be at the level ‘desired’ by road users. Thus, ‘desired’ and ‘affordable’ maintenance standards were identified at three levels, with Level 3 being the minimum level to protect the investment whilst providing for a reasonable level of road safety. The performance indicators in relation to these standards/levels are shown in Table 8.

Table 8 : Performance Indicators in relation to Standards

Item Performance Indicator Level 1 [Good]

Level 2 [Adequate]

Level 3 [Acceptable]

1 Roughness [IRI] mm/m 2 3 4

2 Potholes – max No/km 0 2 – 3 4 – 8

3 Cracking – percentage 5% 10% 10% – 15%

4 Rutting - % max permissible [20 mm] 1% 1.5% 2.5%

The committee also recommended that as a part of National policy it should be the intent to reach the following performance criteria for both National and State Highways throughout the country;

(i) Sixty percent [60%] of highways at Level 1

(ii) Thirty percent [30%] of highways at Level 2

(iii) Ten percent [10%] of highways at Level 3

4.10 MAINTENANCE AND REHABILITATION REQUIREMENTS As has already been noted, in order to estimate maintenance requirement a comprehensive condition survey of the network is required, which would provide data on the residual pavement life and roughness. The lack of data on structural strength makes such an exercise even more uncertain.

Whilst the primary objective of this review is to examine the level of maintenance funding to be allocated/provided from the Road Fund, it is also practical to look at the total overall funding requirement necessary to bring the ‘network’ to a level that it can be maintained. It will therefore be necessary to estimate the length of the network that will require Rehabilitation / Strengthening before an effective maintenance regime for the entire network can be established.

4.11 DATA REQUIREMENTS AND ANALYSIS The identification of road funding requirements is, to a large extent, dependent on the availability of information concerning the network which, especially in the case of maintenance, requires concise information on road condition and traffic.


February 2008 22

4.11.1 Road network condition

As a part of the quantification of the user charges to be levied, it is necessary to identify the current condition of the network under the management of PWD.

Investigations within PWD have indicated that this is not possible to define with any degree of accuracy. However, within PWD a system is available to identify a long term maintenance plan. This system, incorporated within software named “DHV Road Manager” developed by the Project Co-ordinating Consultants [PCC]7 , was recently run to define the “Long Term maintenance Planning 2006/07 – 2010/11”8 . In order that the programme could be run it was necessary that data be collected to define the condition of the network.

The data collection comprised various data on; IRI; rutting; corrugation; depressions; irregularities; longitudinal cracking; alligator cracks; strip/fret/ravelling; bleeding, etc. For the collection of this data, PWD outsourced this to a private body whom were issued with the specially developed data collection forms and guidelines on how to undertake the survey and complete the form.

Following the collection of the data this was sent to DHV in Holland after which the report “Long Term maintenance Planning 2006/07 – 2010/11” was published. However, inspection of the base data indicated a strong possibility that the data had been collected and recorded incorrectly, thus invalidating the results produced by DHV Road Manager9.

As a further potential source of condition data, a review was made of the condition survey data for State Highways and District roads which is produced annually by each of some 300 divisions10. In this document the condition of each kilometre of the network is given using a rating system which defines the road section as either category A, B, C or D. Whilst it was initially thought that for maintenance purposes this corresponded to Excellent, Good, Fair and Poor and thus a subjective definition of the condition, in the event this proved not to be the case. It is now understood that the rating applies to the year in the maintenance cycle that the road has reached [as shown below] and does not represent any survey result of the actual condition of that road section.

Road Category Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 State Highways A B C D A B C D District Roads A A B C D A A B Village Roads A A B B C C D D

7 DHV Consultants BV in association with Halcrow & Partners, Operations Research Group, Development Consultants Ltd and, MDP Consultants [Pvt] Ltd. 8 Report – 1st June 2006 version 1 9 As recorded in the Long Term Maintenance Planning 2006/07 – 2010/11 report; page 12 paragraph 3 – “ Unfortunately the visual inspections have been executed slightly different from the prescribed format. This has resulted in scores that show a more average pattern, as compared to the occurrence of occasional peak values, over all damage types and all road sections ……. Proper instructions and training of inspectors is an important aspect of preparing planning results.” 10 Marg Parilekh


February 2008 23

The current system for maintenance does not reflect the actual condition of any particular road section. In addition, the maintenance treatment applied to each road category does not take account of traffic composition, vehicle damage factors, residual pavement life nor, structural strength, all of which are essential elements in the design/designation of any maintenance intervention. Thus, all maintenance interventions can be considered to be time rather than condition driven.

4.11.2 Identification of requirements

• Projection of future road development: Clearly, in developing an overall maintenance programme, it is not only necessary to identify the existing network under the management of PWD, but also any future additions, changes to the network etc., that may result in a change in maintenance requirements. It will therefore be necessary to take account of any potential new roads built under any BOT schemes, as well as any new roads projects funded by the State government and/or any other sources both within and outside PWD. Given that PWD has no Master Plan for the road network and no formal planning to identify likely additional capital development projects, at this stage this item has been left in abeyance.

• Traffic volumes, traffic composition and vehicle registrations: One of the key components in the determination of future maintenance requirements is traffic volume and composition. Traffic data for each road under the management of PWD should therefore be identified. Discussions with PWD have indicated that whilst in the past a bi-annual traffic counts [April and October] were conducted on all major roads within the State, these are no longer undertaken by the Districts with traffic data only being collected when a study of a particular road is required. With little or no traffic data available it is difficult to identify use and any factors that might be related to condition.

The Motor Vehicle Department is responsible for the functions that pertain to road transport, such as: vehicle registrations; issue of driving licences; issue of transportation permits for goods and passengers and, tax collection. A review is required of any annual reports of the department and any data that is assembled in respect to any specific items identified. In Table 9 below, the numbers of vehicles registered in UP is shown.

Table 9 : Registered Vehicles in Uttar Pradesh

Year Motor Cycles Cars Large

Bus Mini Bus Trucks

3-Wheeler Delivery

Tractors Tempo/

Auto Rickshaws

Other

1994 - 1995 167,256 12,200 1,493 1,092 5,953 1,156 20,467 4,811 3,468

1995 - 1996 168,676 13,978 1,400 763 7,310 2,093 28,450 5,083 6,686

1996 - 1997 230,993 27,309 1,146 588 10,581 3,659 34,718 10,796 11,162

1997 - 1998 254,225 28,985 1,813 730 9,593 3,112 39,311 10,145 8,439

1998 - 1999 325,793 33,197 1,244 814 9,282 3,837 52,650 10,698 12,882

1999 - 2000 329,633 42,766 1,575 1,031 8,312 3,921 51,286 10,934 10,897

2000 - 2001 406,216 39,840 1,450 1,439 7,202 4,817 84,141 11,933 7,625


February 2008 24

Year Motor Cycles Cars Large

Bus Mini Bus Trucks

3-Wheeler Delivery

Tractors Tempo/

Auto Rickshaws

Other

2001 - 2002 364,839 64,241 730 745 3,619 2,325 38,750 6,927 16,550

2002 - 2003 552,378 43,827 1,452 1,005 7,051 3,531 40,715 9,546 9,912

2003 - 2004 585,013 47,189 1,182 910 13,259 3,766 39,421 11,302 8,773

2004 - 2005 665,589 52,311 1,223 942 16,827 4,260 42,714 9,691 9,130

2005 - 2006 769,183 60,090 1,570 1,209 17,825 5,216 52,705 12,627 14,364

2006 - 2007 773,578 71,213 1,565 1,206 22,895 4,909 45,173 20,235 16,189

Any growth in the vehicle fleet will almost certainly have an impact on the sales of automotive fuels as more road users join the ‘vehicle fleet’. This growth can therefore be used, as a surrogate for the growth in sales of automotive fuels.

• Axle load distribution: Wherever possible it is also necessary to collect information on the estimated number of standard axles for various parts of the network in order to estimate residual pavement strength. It is also to be noted that experience in other States within India has indicated that overloading takes place on both State and district highways. The overloading of vehicles, especially trucks, has an important and detrimental impact on the deterioration of pavements. Given that only limited data is available within PWD, it is clear that this cannot be used in the analysis although it is recommended that a review be undertaken of the State axle load regulations, enforcement, the fines and, fees collected etc.

• Budgets and expenditures on road maintenance and, the unit rates applied: As a part of the initial analysis it will be necessary to review past budget requirements under the budget headings of 3054 and 5054, planned and non planned, as well as actual allocations by source of funds. By reviewing budgeted outlays and expenditure for maintenance this will provide indications as to the present levels of funding in relation to actual and future maintenance funding requirements. As a part of this it will also be necessary to review maintenance interventions and their associated unit rates and cost.


February 2008 25

5. OPTIONS FOR THE ROAD FUND

5.1 SOURCES OF REVENUE

Funds both from and to the road sector are all directed through the State Exchequer and the Consolidated Fund [CF]. Allocations from the CF are made through the Planning and Finance Commissions. The State Planning Department, which identifies the States plans incorporating, where necessary, Central Governments five year plans, is the decision maker for the allocations to the various sectors based on the objectives that have been laid down by the State Government.

5.1.1 Principle of Road User Charging

The principle behind the taxation of vehicles is that a vehicle owner/operator should not pay less than the economic cost of fuel and other resources consumed in making a particular trip, plus, the marginal cost for the maintenance of the road damage thus caused. The damage or deterioration caused by light vehicles is, however, small in comparison to heavy trucks, and it is the latter that generally cause pavement deterioration/damage. Heavy vehicles therefore reduce the useful life of a pavement which in turn increases the cost of maintenance and rehabilitation11.

The case in India is that both Central and State Governments collect taxes that relate to vehicle users. Internationally, road funds tend to be sourced mainly from a levy on fuel and to that extent, both India and UP are no different. In the case of UP the fuel levy is based on the Trade Tax applied to fuel. This was originally set at 14% and 16% for petrol and diesel respectively and was then raised to 20%, to incorporate a user charge, with the marginal increase of 6% and 4% per litre being assigned – supposedly earmarked - for the State Road Fund. In 2004 the Trade Tax on diesel and petrol was increased to 21% with the overall Trade Tax on petrol being raised to 25% at the end of 2004. The specifying of a levy as a percentage ensures that base increases in the cost of fuel are reflected in increased revenue from Trade Tax and, in addition, the amounts can be clearly separated.

Other taxes that are and can be imposed comprise: vehicle registration fees; vehicle licence fees; transit fees and fines. Some funds also derive some of their revenue from non road user related taxes such as vehicle Trade Tax and/or from the general budget allocations. The other sources of revenue from road users in UP are discussed below.

It is worth noting here that one of the classic forms of a road user charge is an annual vehicle registration fee which is to be found world wide. This annual fee, paid by all vehicles and scaled according to vehicle type [and potentially, also by road and/or environmental damaging characteristics] is a vehicle ‘ownership’ charge that provides the right of entry to use the road network. It is understood, however, that in 1994 such ‘Entry Fees’ to the road system were removed.

11 This damage has been translated into a cost function which was derived from engineering experiments and which examined the relationship between road damage and axle weight factors. The so-called “fourth power rule” indicates that the doubling of axle weights increases road damage by a factor of 16 (=24). [AASHTO]


February 2008 26

5.1.2 Charges levied on vehicles

One of the direct taxes applied to road users in UP are the taxes on vehicles known as motor vehicle taxes as identified in Annexure D These are applied either as a ‘one off’ tax on a private vehicle or as a quarterly charge on all commercial vehicles. The total tax collected between 2000/01 and the latest date for which data is available, is shown in Table 10.

Table 10 : Revenue generation from motor vehicle taxation

Year Motor-Vehicle

Tax

Additional Taxes from Goods

Carriage

Additional Taxes from Passenger Vehicle Total

In Crore Private Vehicle UPSRTC Road Tax

2000-2001 29,261.46 14,660.25 12,879.09 7,300.00 - 641.01

2001-2002 36,058.53 14,287.25 11,764.52 2,819.00 - 649.29

2002-2003 49,923.69 16,034.24 14,330.56 4,805.00 - 850.94

2003-2004 48,235.13 18,082.58 15,595.90 4,336.00 - 862.50

2004-2005 46,945.40 18,846.36 15,593.49 4,680.00 - 860.65

2005-2006 43,408.10 45,313.53 11,732.38 8,127.00 - 1,085.81

2006-2007 57,374.84 23,025.84 18,214.19 14,429.00 - 1,130.44

Source : Transport Commission

5.1.3 Fees levied on road users

In addition to charges levied on vehicles, the Transport Department also applies fees on road users for various forms and documentation, as detailed in Annexure E. Whilst the sums involved from these charges are generally relatively small, totalling no more than around Rs 60 Crore, they are yet another charge on road users. Despite the details being available for the period 1994 to 2000, as shown in Table 11, the transport commission advised that they were unable to supply these details for the period 2000 to date, nor for that matter, the total sum collected.

Table 11 : Fees collected by the Transport Department [Rupees Crore]

Fee Type 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 Vehicle registration fee 2.26 2.85 3.71 4.23 4.98 6.03 Fitness certificates 1.61 1.94 2.46 2.43 2.57 3.67 Driving licence fee 2.53 2.73 3.70 4.04 4.34 6.71 Heavy vehicle permit 8.31 9.60 10.47 9.68 13.41 12.44 Conductors licence 0.08 0.03 0.03 0.04 0.04 0.06 Bus permit 2.05 2.14 1.79 1.61 2.75 2.01 Taxi permit 0.73 1.35 1.19 0.91 1.56 1.20 Other fees 8.26 12.97 10.77 9.98 19.30 12.90 TOTAL 25.83 33.61 34.12 32.92 48.95 45.02

Source : PS and IDS for PWD – TCE and TCS Report


February 2008 27

In order to derive a figure for the analysis the previous growth up to 1998/99 has been assumed. A total figure for fees has then been derived for period 2000/01 of Rs 57.05 Crore.

5.1.4 Road User penalties

The Traffic Department also collects penalties issued on drivers and their vehicles under the compliance with the Motor Vehicles Act. In Table 12 the penalties recovered over the period 2000/01 to date are shown.

Table 12 : Collection of Vehicle User Penalties

Year Penalties recovered Rs Crore

2000 to 2001 27.54

2001 to 2002 23.52

2002 to 2003 20.76

2003 to 2004 26.39

2004 to 2005 32.09

2005 to 2006 32.57

2006 to 2007 na

Source : Traffic Department

5.1.5 Penalties assigned to vehicles

The numbers of penalties issued against vehicles has grown dramatically over the years from a figure in 1990 of Rs 180 Lakhs to a figure for 2006/07 of some Rs 4,959 Lakhs, The amounts collected since the year 2000 are shown in Table 13.

Table 13 : Collection of Vehicle Penalties

Year Penalties recovered through the courts

Penalties recovered through the Dep’t

Total In Crore

2000 to 2001 146.08 2,754.22 29.03

2001 to 2002 145.69 2,351.65 24.97

2002 to 2003 148.68 2,075.98 22.25

2003 to 2004 163.12 2,638.77 28.02

2004 to 2005 133.68 3,209.40 33.43

2005 to 2006 201.64 4,036.00 42.38

2006 to 2007 194.80 4,764.00 49.59

Source : Transport Department


February 2008 28

5.1.6 Charges levied on use

By far the largest road user charge is represented by the Trade Tax applied to automotive fuels. As has been identified earlier [see section 3.2] this is currently set at 25% and 21% for petrol and diesel respectively. Of this total, 6% in the case of petrol and 4% in the case of diesel has been specifically identified to be allocated to the RF. Currently a 10% Trade Tax is also applied to CNG for automotive use but none of this is allocated to the RF.

It is also to be noted that on every litre of either fuel that is sold there is a further two rupees per litre cess added for allocation to the Central Road Fund.

In Table 14 a breakdown is given of the data obtained from the Trade Tax department for Trade Tax that has been applied to automotive fuels from 2000/01 to date. It is to be noted that the tax department has advised that it is unable to identify a breakdown of total Trade Tax by type of automotive fuel.

Table 14 : Trade Tax by Type of Automotive Fuel

Year Petrol Diesel Sub Total

Total CNG Total Trade TaxRF CF RF CF RF CF

2000 to 2001 na na na na - - na na -

2001 to 2002 na na na na - - 1,600.39 na -

2002 to 2003 na na na na - - 1,817.46 na -

2003 to 2004 na na na na - - 1,988.47 na -

2004 to 2005 na na na na - - 2,177.00 na -

2005 to 2006 na na na na - - 2,472.48 na -

2006 to 2007 na na na na - - 2,662.84 na -

Source : Trade Tax Department and Ministry of Finance

5.1.7 Assessment of Road Sector Revenues

As a first step it is necessary to identify the revenues that the State Government has received from the road sector in the recent past. Clearly, should it be found that revenues are greater than the current costs in the road sector then this could provide a convincing argument to Government for the allocation of more funds to the sector. These are shown in Table 15.


February 2008 29

Table 15 : Estimate of Road Sector Revenues [Rs Crore]

Sources of Funds 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Fuel Levy on Petrol Na na na na na na na

Fuel Levy on Diesel Na na na na na na na

Sub Total 0.00 221.00 230.00 300.00 480.00 742.00 1,458.00

Remaining Trade Tax on Automotive Fuels 0.00 1,379.39 1,587.46 1,688.47 1,697.50 1,730.48 1,204.84

Total Trade Tax on Diesel & Petrol 0.00 1,600.39 1,817.46 1,988.47 2,177.50 2,472.48 2,662.84

Trade Tax on CNG for vehicles na na na na na na na

Total Trade Tax on Automotive Fuels 0.00 1,600.39 1,817.46 1,988.47 2,177.50 2,472.48 2,662.84

Traffic Penalties and Fines 2.44 2.10 3.09 3.78 4.07

Penalties imposed on vehicles 29.03 24.97 22.25 28.02 33.43 42.38 49.59

Total Fines & Penalties on Vehicles 31.47 27.07 25.34 31.80 37.50 42.38 49.59

Revenue collection Transport Dept [Trspt Taxes] 641.01 649.29 850.94 862.50 860.65 1,085.81 1,130.44

Revenue collection Transport Dept [Trspt Fees]** 57.05 57.05 57.05 57.05 57.05 57.05 57.05

Total Transport Department 698.06 706.34 907.99 919.55 917.70 1,142.86 1,187.49

Toll receipts roads & bridges 0.41 135.55 22.71 21.37 29.08 55.19 0.00

CRF allocated as a reserve 0.00 0.00 9.47 9.46 9.35 30.41 18.99

CRF for maintenance & development 0.00 0.00 85.19 85.15 84.18 273.67 170.92

Central Road Fund 0.00 0.00 94.66 94.61 93.53 304.08 189.91

TOTAL [Rupees Crore] 729.93 2,469.34 2,868.15 3,055.79 3,255.30 4,016.99 4,089.83

Trade Tax on Fuel as % of Total User Charges - 64.8% 63.4% 65.1% 66.9% 61.6% 65.1%

Revenue for Road Maintenance ONLY - 221.00 315.19 385.15 564.18 1,015.67 1,628.92

Notes: * For bridges the objective is to achieve a set target. When this target is achieved the tolling of the facility generally ceases.

** Consultants Estimate for 2000/01 has been assumed throughout the period

It should be noted that there are two other user charges that have not been quantified. The first is the tax applied to the purchase of a vehicle and the second the taxes applied to the sale of all automotive spare parts, including tyres and oil. Whilst these can be considered a user charge they are generally taken to be a part of the general taxation regime of a country/state, that is applied to the sale of all products within the market place. As such these have therefore been omitted from the analysis.

As can be seen, Trade Tax on automotive fuels represents around 65% of all road user charges. With the levy of 6% and 4% on petrol and Diesel, respectively, amounting to Rs 1,458.00 Crore, this alone represents 35% of all taxes on road users. It is also of interest to note the seemingly large fluctuations in the amount of the receipts from the CRF. Given the general growth in the vehicle fleet, a general rising growth in the actual amount would be expected.


February 2008 30

5.2 THE REQUIREMENTS OF THE ROAD FUND

The purpose of this section is to establish the maintenance standards and the maintenance and capital intervention work required for the road network currently under the management of PWD. Basically there are three issues that need to be addressed in order to demonstrate the requirements of the Road Fund.

(i) What is the maintenance requirement for the PWD network in terms of both the routine and periodic maintenance necessary to ensure that the road is commensurate with an acceptable level of service? Level of service in this context refers to the users perception as to the quality of the road which will be perceived in terms of roughness, ravelling, cracking, rutting and potholes.

As has been noted previously, in order to identify maintenance requirements it is necessary that information concerning the condition of the network be available which is, unfortunately, not the case. The first step in the process would be to examine network condition in order to ascertain the work required to both stabilise and bring the network up to a similar condition throughout. In such circumstances it is to be anticipated that work required throughout the network would range over all types of work interventions undertaken by PWD, and/or their contractors.

As such an approach is not possible a simpler approach has therefore been adopted. Whilst over the years, PWD has been undertaking strengthening and other works on many of the roads under its management, it has not been possible, with any degree of certainty, to identify these roads nor, to ascertain their design characteristics and, most importantly, their current condition. Based on the premise that all roads require to be brought to the same standard before a periodic maintenance programme can be implemented, a conservative assumption has therefore been made that all roads will require strengthening, with the only exception being those roads included in past and present externally funded works programmes12 . These roads are assumed to have been built to an acceptable standard and therefore should immediately be incorporated in a routine and periodic works programme.

(ii) Despite this it is already clear that by adopting this philosophy it is likely that PWD will have neither sufficient funds nor contractors to undertake such an exercise in a single year. A programme over a number of years will therefore be required. This will inevitably mean that some roads will not receive strengthening works for a number of years. In order to ensure that all roads remain open to traffic it has therefore been assumed that if a road is not included in the strengthening programme it will require what has been termed as ‘holding works’. These are assumed to be similar, but not so extensive, to periodic maintenance. Nevertheless, such holding works will only have a two year life and so following two years of traffic, unless a road is included in the next strengthening programme, further holding works will be required.

(iii) Having estimated this works requirement the next step is to plan the maintenance strategy and then identify the required maintenance interventions for the network.

12 World Bank State Roads Programme [SRP I and SRP II] plus the Asian Development Bank work on State Highways


February 2008 31

The strategy that has been assumed for maintenance is that all roads, whatever their condition, will receive annual routine maintenance. In the case of periodic maintenance, given the lack of annual post monsoon condition data, a time based renewal programme has been assumed, in line with that currently used by PWD [see Table 5]

The costs per kilometre for two lane National and State highways with paved shoulders and, MDR/ODR/VR without paved shoulders, have been calculated based on the information contained within “Report of the Committee on Norms for Maintenance of Roads in India, Annex XXIV G and Annex XXIX D - MoRTH, 2001.”. The cost of other lane configurations has then been derived using the conversion factors given in Section 6.17.1 and Section 6.17.2 of the same report. Rates for specific repair items, such as: pot hole repairs; patching; slurry seal; fog seal; rut repairs, etc., have been calculated based on information contained within the “Standard Data Book for Analysis of Rates (First Revision), MoRTH, 2003”.

Based on the above, in Table 16 and Table 17 below, the cost per kilometre for ordinary repairs / routine maintenance and, periodic maintenance are given, for varying levels of traffic density.

Table 16 : Estimated ordinary [routine] maintenance costs

Category

NH/SH MDR/ODR/VR

<450 CVDBetween 450-1500

CVD

Between 1500-4500

CVD More than 4500 CVD <150 CVD

Between 150-450

CVD

Between 450-1500

CVD More than 1500 CVD

Single lane without paved

shoulder 95,576 105,361 124,441 138,874 41,328 42,658 47,113 52,268

Intermediate lane without

paved shoulder

116,057 127,938 151,107 168,633 49,594 51,190 56,536 62,722

Two lane without paved

shoulder 153,604 169,330 199,995 223,190 66,125 68,253 75,381 83,629

Source : Consultants estimate

Table 17 : Estimated periodic maintenance costs

Category

NH/SH MDR/ODR/VR

<450 CVDBetween 450-1500

CVD

Between 1500-4500


Between 150-450

CVD Between 450-

1500 CVD More than 1500 CVD


shoulder 510,452 510,452 788,195 788,195 510,452 510,452 585,472 585,472

Intermediate lane without paved

shoulder 748,663 748,663 1,156,019 1,156,019 748,663 748,663 858,692 858,692

Two lane without paved shoulder 952,844 952,844 1,471,297 1,471,297 952,844 952,844 1,092,881 1,092,881

Source : Consultants estimate


February 2008 32

Finally the costs associated with both strengthening and holding works have also been estimated as given in Table 18 and Table 19.

Table 18 : Cost per kilometer for Strengthening

Category

NH/SH MDR/ODR/VR

<450 CVD Between 450-1500

CVD

Between 1500-4500


Between 150-450

CVD

Between 450-1500



shoulder 957,360 957,360 1,114,758 1,114,758 957,360 957,360 1,114,758 1,114,758

Intermediate lane without

paved shoulder 1,404,128 1,404,128 1,634,978 1,634,978 1,404,128 1,404,128 1,634,978 1,634,978

Two lane without paved

shoulder 1,787,071 1,787,071 2,080,881 2,080,881 1,787,071 1,787,071 2,080,881 2,080,881

Table 19 : Cost per kilometer for Holding works

Category

NH/SH MDR/ODR/VR

<450 CVD

Between 450-1500

CVD

Between 1500-4500


<150 CVD

Between 150-450

CVD

Between 450-1500

CVD

More than 1500 CVD


shoulder 169,588 169,588 408,362 408,362 169,588 169,588 408,362 408,362

Intermediate lane without paved

shoulder 248,729 248,729 598,930 598,930 248,729 248,729 598,930 598,930

Two lane without paved shoulder 316,564 316,564 762,275 762,275 316,564 316,564 762,275 762,275

For further information and detail concerning the derivation of these costs, reference should be made to report 45, “Report on comprehensive objective analysis of long term core road network maintenance funding requirements for future plan processes”.


February 2008 33

6. THE ANALYSIS

6.1 NETWORK CRITERIA AND ASSUMPTIONS

Based on the data detailed in the previous section a simple spread sheet model has been developed to calculate the annual costs of the works programme over a 20 year period. It should be noted here that the works programme as detailed does NOT include the cost of works for any capital programmes that may be required to be undertaken in the future by PWD, for example road widening, construction of new roads etc.

In addition to the costs for routine maintenance, periodic maintenance, strengthening and holding works, detailed in Tables 16, 17, 18 and 19 respectively, the model also incorporates the ability to change the assumptions and criteria as shown in Table 20.

Table 20 : Model input parameters

Works cycle for PERIODIC MAINTENANCE and number of years for STRENGTHENING programme

Road Classification Highway Configuration Periodic

Cycle Years

Strengthening Programme

Years

Network Length

Kms

State Highways TWO Lanes 4 4 4,109

INTERMEDIATE Lane 4 4 1,613 SINGLE Lane 4 4 3,142

Major District Roads TWO Lanes 4 5 478


Other District Roads TWO Lanes 5 6 1,123


Village Roads TWO Lanes 6 7 2,396

INTERMEDIATE Lane 6 7 79,882 SINGLE Lane 6 7 181

Other Village roads [unpaved] SINGLE Lane 6 0 5,969 NON PWD Roads [Paved] SINGLE Lane 6 7 25,000 NON PWD Roads [Unpaved] SINGLE Lane 6 0 118,671 Externally Funded Projects [World Bank, ADB etc] TWO Lanes 5

In addition to PWD roads, the ability to include and exclude all other [orphan roads] has also been included13. The total network length that than can therefore be examined is 271,181 kms [this excludes 5,570 kms of National Highways].

13 Following from the Focus Group meeting of 26th September 2007


February 2008 34

Further to the above it has also been necessary to identify the length and completion dates of those works that are or have been externally funded, namely, World Bank SRP I&II and ADB State Roads Project, in order that they can be included in the maintenance programmes. For analysis purposes, as detailed information concerning all the projects was not available, it has been assumed that the roads selected were and are originally of a two lane configuration and that they remained as two lanes following the completion of works. The kilometres completed by year are shown in Table 21 for the World Bank SRP I and II programmes.

Table 21 : Externally funded works programmes

Completion State Highways MDR ODR

2000 184.30 1 0.00 0.00

2001 0.00 0.00 0.00

2002 0.00 0.00 0.00

2003 604.00 0.00 0.00

2004 353.14 0.00 0.00

2005 283.30 5.80 0.00

2006 77.00 46.30 0.00

2007 643.56 30.62 11.00

2008 794.16 134.94 0.00

Note : 1 Asian Development Bank Project

Source : PWD

Finally, the model incorporates the ability to change the other assumptions and criteria as identified below. By including the ability to change all the criteria and assumptions used in the analysis, this enables the funding requirements to be estimated for many different and varied scenarios.

• Holding works term [years] by road classification and highway configuration

• State Road Fund for the base year and the percentage increase year on year over the twenty year period

• PWD Budget allocation for the base year and the percentage increase year on year over the twenty year period

• Changes in Grant [54; 55; 56; 57; 58; 83] allocations by year over the twenty year period


February 2008 35

6.2 FINANCIAL CRITERIA AND ASSUMPTIONS

6.2.1 State Road Fund Revenue

Several approaches have been used to identify the past and current revenue proceeds for the State Road Fund [SRF]. The actual amount allocated to the SRF has been identified by PWD but appears to be at variance with the estimated amounts available over the years if actual fuel consumption data is used. What is clear, however, is that the current annual figure is over Rs 1,000 crore. It is to be noted that these Funds are not paid into a separate account to be administered by the SRF Management Committee [SRFMC] but remain with the State Exchequer as a part of the Consolidated Fund and are distributed in accord with the normal procedures. These funds should be paid into a separate account established by the RFMC, on a monthly basis, to ensure stability and sustainability of the fund.

Thus, in financial year 2006/2007 the budgeted amount available for distribution by the SRFMC has been given as Rs 1,458 crore, whereas, based on an analysis and forecast of fuel consumption data, a figure of Rs 1,165 has been calculated. In order to err on the side of caution, the lower of the two figures has been assumed to be projected in line with the past growth of the registered vehicle fleet [see Table 9], this being taken as a surrogate for fuel consumption increase over the years.

Over the last 10 years there has been an average annual growth in the vehicle fleet of around 24% [1997 to date]. It is clear that this phenomenal growth cannot be expected to continue and so for the purposes of the analysis a far lower and conservative growth in the vehicle fleet of 5% per annum has therefore been assumed throughout the period. It is to be noted that this is almost half the expected growth rate in GDP for 2007 published by UNCTAD and the Central Statistical Organisation. Even with such a modest growth rate, the total numbers of registered vehicles in the State will have risen to over 6.6 million units.

6.2.2 Other PWD Revenue

In addition to the SRF, PWD also receives revenue from the Consolidated Fund under the budget headings of planned and non planned. Within these main budget heads there are incorporated what can be termed ‘Dedicated Funds’, these being funds that are ‘earmarked’ for special purposes. Removing the funds for Wages and Salaries and, Buildings and maintenance, the funds available for works in general can be isolated as shown in Table 22.

As can be seen, the budgeted funds available have grown by over 50% from 2005/06 to 2007/08. Clearly such a large increase as exhibited in the past, cannot be sustainable in the future. Again, in order to err on the side of caution, for the purposes of the analysis we have assumed that there will only be an annual 5% growth in budgeted funds made available to PWD. It is to be noted that the 1998 UP Road Development Policy [item 7.2 – Arrangements of financial resources] states “A yearly increase of 15% in the budgetary allocation will be provided in the District and State sector”.


February 2008 36

Table 22 : Breakdown of PWD budget

Sr. No. Item

Actual Expenditure 2005 - 06 Budget Provision 2006 - 07 Revised Budget Provision 2006 -07 Budget Provision 2007 - 08

Plan Non- Plan Total Plan Non- Plan Total Plan Non- Plan Total Plan Non- Plan Total

1 Grant No. - 54 151.88 54,701.24 54,853.12 218.05 63,093.28 63,311.33 218.05 63,498.26 63,716.31 222.70 66,503.32 66,726.02

2 Grant No. - 55 1,819.89 1,835.56 3,655.45 2,286.22 2,164.18 4,450.40 2,436.23 3,062.12 5,498.35 4,535.00 4,016.39 8,551.39

3 Grant No. - 56 32,268.63 0.00 32,268.63 29,250.00 17,500.00 46,750.00 29,250.00 17,500.00 46,750.00 8,000.00 17,500.00 25,500.00

4 Grant No. - 57 29,508.95 1,846.37 31,355.32 28,389.21 2,211.27 30,600.48 38,389.21 2,211.27 40,600.48 26,570.00 1,000.00 27,570.00

5 Grant No. - 58 163,658.23 116,918.20 280,576.43 172,493.01 155,799.76 328,292.77 248,555.38 145,337.39 393,892.77 225,901.27 157,952.74 383,854.01

6 Grant No. - 83 31,803.81 0.00 31,803.81 59,310.21 0.00 59,310.21 59,310.21 0.00 59,310.21 154,600.00 0.00 154,600.00

Sub Total 259,211.39 175,301.37 434,512.76 291,946.70 240,768.49 532,715.19 378,159.08 231,609.04 609,768.12 419,828.97 246,972.45 666,801.42

DEDUCT

Grant 54 54,853.12 63,716.31 66,902.13

Grant 55 3,655.45 5,498.35 5,773.27

SRF 72,464.06 137,384.18 144,253.39

Sub Total 130,972.63 206,598.84 216,928.78

Balance Road & Bridge works 303,540.13 403,169.28 449,872.64

Source : PWD Performance Budget


February 2008 37

6.3 ANALYSIS RESULTS

Based on the above, an analysis has been undertaken for a twenty year period 2008/09 to 2027/28 as shown in Table 23. In this analysis it has been assumed that the revenue credited to the SRF from the marginal increase in Trade Tax is to be used exclusively for maintenance work14.

As can be seen from the analysis, apart from a 5 year period [2017 to 2021/22], the revenue from the SRF would be sufficient to cover ALL maintenance. Even for the five years in question the maximum deficit in one year [2018/19] is only Rs 314 Crore. However, if the actual figure of Rs 1,458 Crore received by PWD from the SRF is used as the base year figure then, the SRF would be more than sufficient to allow for the most severe and unlikely assumption that periodic maintenance on all roads [including orphan roads] be undertaken every two years.

Under normal circumstances, and during the years where the strengthening of the network is taking place, it has further been assumed that if required, and after the maintenance programme has been covered, any funds remaining from the SRF could be used to assist in this strengthening programme. Again, assuming the actual figure of Rs 1,458 Crore received by PWD from the SRF in the base year, the fund is more than sufficient to assist, to some degree, in the identified strengthening programme.

The conclusion of this analysis is therefore clear. Given the entire proceeds of the marginal increase in Trade Tax on automotive fuels is credited to the SRF account, then there will most likely be sufficient funds available to cover all routine and periodic maintenance requirements. There will also be funds available to provide for some strengthening works, if required, and an annual 5% Emergency Works Fund. At this stage, therefore, no further user charges require to be applied to increase the revenue to the SRF. However, two further points are of note;

1) All funds that are currently received from the Central Road Fund, dedicated for use on maintenance works, should also be allocated to the SRF in order to avoid any confusion as to their allocation.

2) A review on the consumption of CNG and the necessity, if any, of increasing Trade Tax on CNG, in the future, should be undertaken by the RF.

14 In the analysis, maintenance work is deemed to be routine and periodic only.


February 2008 38

Table 23 : Estimate of funding requirements for PWD road maintenance and strengthening programme

Works Intervention 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Routine Maintenance 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 1,008.46 Periodic Maintenance 10.39 10.39 20.77 20.77 31.16 331.22 627.23 1,284.58 1,284.58 1,082.28 1,284.58 1,284.58 1,284.58 1,284.58 1,082.28 1,284.58 1,284.58 1,284.58 1,284.58 1,082.28 World Bank State Roads Project

Routine Maintenance 48.66 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 67.52 Periodic Maintenance 131.59 88.87 51.96 42.32 43.51 99.24 131.59 88.87 51.96 42.32 43.51 99.24 131.59 88.87 51.96 42.32 43.51 99.24 131.59 88.87

Sub Total Maintenance 1,199.11 1,175.23 1,148.71 1,139.07 1,150.65 1,506.43 1,834.80 2,449.43 2,412.52 2,200.58 2,404.07 2,459.80 2,492.15 2,449.43 2,210.22 2,402.88 2,404.07 2,459.80 2,492.15 2,247.13 Holding Works 2,733.07 0.00 1,633.85 0.00 620.91 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Strengthening 2,312.39 2,312.39 2,312.39 2,312.39 1,980.30 1,794.75 1,232.87 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Sub Total - Strengthening & Holding Works 5,045.46 2,312.39 3,946.24 2,312.39 2,601.22 1,794.75 1,232.87 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL WORKS COST 6,244.57 3,487.63 5,094.95 3,451.46 3,751.86 3,301.18 3,067.67 2,449.43 2,412.52 2,200.58 2,404.07 2,459.80 2,492.15 2,449.43 2,210.22 2,402.88 2,404.07 2,459.80 2,492.15 2,247.13

State Road Fund 1,284.41 1,348.63 1,416.06 1,486.87 1,561.21 1,639.27 1,721.24 1,807.30 1,897.66 1,992.55 2,092.17 2,196.78 2,306.62 2,421.95 2,543.05 2,670.20 2,803.71 2,943.90 3,091.09 3,245.65 Balance brought forward 0.00 21.09 187.01 442.32 773.21 1,162.67 1,271.08 1,146.77 506.02 18.75 0.00 0.00 0.00 0.00 0.00 326.47 570.80 950.40 1,407.51 1,974.88 Emergency Repairs Fund brought forward 0.00 64.22 71.70 83.74 100.65 121.75 146.18 156.93 155.55 127.96 106.96 109.96 115.34 121.10 127.15 133.51 156.51 176.55 203.54 235.11

Balance of Road Fund 1,284.41 1,433.94 1,674.77 2,012.93 2,435.07 2,923.70 3,138.50 3,110.99 2,559.23 2,139.25 2,199.14 2,306.74 2,421.96 2,543.05 2,670.20 3,130.18 3,531.02 4,070.85 4,702.14 5,455.64 LESS Maintenance 1,199.11 1,175.23 1,148.71 1,139.07 1,150.65 1,506.43 1,834.80 2,449.43 2,412.52 2,200.58 2,404.07 2,459.80 2,492.15 2,449.43 2,210.22 2,402.88 2,404.07 2,459.80 2,492.15 2,247.13 LESS Emergency Works Fund AT………… 5.0% 64.22 71.70 83.74 100.65 121.75 146.18 156.93 155.55 127.96 106.96 109.96 115.34 121.10 127.15 133.51 156.51 176.55 203.54 235.11 272.78

SRF Balance 21.09 187.01 442.32 773.21 1,162.67 1,271.08 1,146.77 506.02 18.75 (168.29) (314.89) (268.40) (191.29) (33.53) 326.47 570.80 950.40 1,407.51 1,974.88 2,935.72 SRF available for Strengthening & Holding works 0

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

[Use available funds = 1 .. Don't use available funds= 0]

SRF Balance 21.09 187.01 442.32 773.21 1,162.67 1,271.08 1,146.77 506.02 18.75 (168.29) (314.89) (268.40) (191.29) (33.53) 326.47 570.80 950.40 1,407.51 1,974.88 2,935.72 Transfer from PWD Budget Allocation 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 168.29 314.89 268.40 191.29 33.53 0.00 0.00 0.00 0.00 0.00 0.00

SRF Balance Carried Forward 21.09 187.01 442.32 773.21 1,162.67 1,271.08 1,146.77 506.02 18.75 0.00 0.00 0.00 0.00 0.00 326.47 570.80 950.40 1,407.51 1,974.88 2,935.72

PWD Budget Requirement for Strengthening & Holding works 5,045.46 2,312.39 3,946.24 2,312.39 2,601.22 1,794.75 1,232.87 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

PWD Budget Allocation 4,444.94 4,667.19 4,900.54 5,145.57 5,402.85 5,672.99 5,956.64 6,254.47 6,567.20 6,895.56 7,240.34 7,602.35 7,982.47 8,381.59 8,800.67 9,240.71 9,702.74 10,187.88 10,697.27 11,232.14 PWD Budget to be used for Maintenance 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 168.29 314.89 268.40 191.29 33.53 0.00 0.00 0.00 0.00 0.00 0.00 PWD Fixed expenditures

Grant No - 54 669.02 702.47 737.59 774.47 813.20 853.86 896.55 941.38 988.44 1,037.87 1,089.76 1,144.25 1,201.46 1,261.53 1,324.61 1,390.84 1,460.38 1,533.40 1,610.07 1,690.58 Grant No - 55 57.73 60.62 63.65 66.83 70.17 73.68 77.36 81.23 85.29 89.56 94.03 98.74 103.67 108.86 114.30 120.01 126.02 132.32 138.93 145.88

Loan REPAYMENT b/f 0.00 1,460.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 TOTAL PWD Expenditures 726.75 2,223.08 801.24 841.30 883.37 927.53 973.91 1,022.61 1,073.74 1,295.71 1,498.68 1,511.38 1,496.43 1,403.92 1,438.91 1,510.85 1,586.40 1,665.72 1,749.00 1,836.45

PWD Works account BALANCE b/f 0.00 0.00 131.71 284.77 2,276.65 4,194.92 7,145.63 10,895.50 16,127.36 21,620.83 27,220.67 32,962.33 39,053.30 45,539.34 52,517.02 59,878.78 67,608.63 75,724.98 84,247.14 93,195.41 Available PWD Budget 3,718.19 2,444.10 4,231.02 4,589.04 6,796.14 8,940.38 12,128.36 16,127.36 21,620.83 27,220.67 32,962.33 39,053.30 45,539.34 52,517.02 59,878.78 67,608.63 75,724.98 84,247.14 93,195.41 102,591.10

Balance (1,327.27) 131.71 284.77 2,276.65 4,194.92 7,145.63 10,895.50 16,127.36 21,620.83 27,220.67 32,962.33 39,053.30 45,539.34 52,517.02 59,878.78 67,608.63 75,724.98 84,247.14 93,195.41 102,591.10 LOAN [Commercial or Other] 1,327.27 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Interest on Loan 10.0% 132.73 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Sub Total 1,460.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Notes : Grant No 54 = Labour Costs and Operating Expenses ; Grant No 55 = Buildings and Maintenance


February 2008 39

7. MANAGEMENT OF THE ROAD FUND

7.1 THE ACT OF ESTABLISHMENT

The Road Fund Management Committee was established under the Act of establishment of January 2000. Under this Act the regulations in relation to name; sources of income; objectives; conditions; work area and process of accounts are detailed. These are shown in Table 24 below.

Table 24 : Details of Act of Establishment

Item from the Act of Establishment Remarks

1. Name of this fund will be “Road Fund”

2. Sources of Income- The income from the increase in the rate of trade tax from the existing value of 14 percent and 16 percent on this 1st sale of MOTOR SPRIT, DIESEL OIL and ALCOHOL, under the trade tax modification (1998) will increase this to 20 percent for both Motor Spirit and Diesel with the marginal increase being available for the Road Fund to the extent to which the State government deems fit. Should Government decide to allocate any other income source to the “Road Fund”, then that income will also be deposited into aforementioned “Road Fund” account.

It is noted that in January 2004 the marginal tax on diesel was increased to 5%. In November 2004 Trade Tax on automotive fuels was increased to 25% but no increase was noted on the marginal Tax. Whilst in total Trade Tax on automotive fuels can be considered as a ‘road user charge’ it is seen as an item for the overall Consolidated Fund rather than specifically for the Road Fund and as such is not specifically allocated to a separate RF account

3. Objectives-The amount available under this fund will be used on maintenance, repairs and strengthening of roads within the State.

It is to be noted that under the 1998 UP Road Development Policy, it is stated that; “3.3 A Road Fund for the maintenance of roads in the State has been created the accruals from the increase in the rate of Trade Tax on Diesel and Petrol will be credited to this fund.” No mention under the policy is made of using the fund for “… repairs and strengthening …”

4. Conditions- The use of the funds made available under this Road Fund, will be determined in accordance with the decisions taken by Road Fund Management Committee. The Committee will decide on the points relevant to the ‘process of meetings’ such as, times of meetings and ‘quorum’ etc. The “Road Fund Management Committee” will comprise the following members.

The original 15 member committee was expanded to 22 members under the Govt. of U.P. notification No.1424/23-1-02--25CG/97TC-4 – Dated 13th May 2002 See Annexure – C for detail

5. Work Area-The monies available in the Road Fund will be used, to the extent possible, for the maintenance and repair of all roads within the State under the Non Plan budget head.

This statement clearly identifies that the SRF is to be allocated for maintenance.


February 2008 40


6. Process of Accounts and Finance- (1) The amount for Road Fund will be made available under Grant No. 58 of Public Works Department under provisions of Income-Expenditure of Account Head 3054 - For Roads and Bridges Non-Planned - 80 General - 797- Reserved Fund/Transfer from Deposit Accounts – 05 - Transit To Road Fund – 35 - Under Account Transition. These funds will be made available from the budget provisions made from the increased rate of Trade Tax from the first sale of UP Motor Spirit, Diesel oil and Alcohol Under Trade Tax Modification (1998) or, income from any other sources that are transferred to Road Fund to the extent to which the state Government deems fit or; transition of an amount shall be done from Revenue head to Road Fund with the sanction/expenditure being under grant No 58. The amount under the grant, equivalent to the expenditure, shall be shown under Section 4, Recoveries. Thus, the equivalent amount of expenditure under the grant will be shown as follows:

8225 Road Bridge Fund

02 State Road & Bridge Fund

101 State Road & Bridge Fund

01 State Road Fund

0101 On the side of distribution of transfer from revenue account because ultimately the expenditure is to be borne out of Road Fund” (2) It will be the responsibility of the Engineer in Chief, PWD, to ensure the proper repair and maintenance of roads financed by Road Fund and for this continuous monitoring will be exercised. The Engineer in Chief will also send monthly financial and physical reports to PWD. At the end of the financial year, the details of all works financed by Road Fund, the financial and physical progress, along with any other relevant/important information will be submitted to PWD.

This represents the 15 digit code number under which all financial transactions are recorded within PWD

Whilst it is to be noted that the funds for the SRF will be generated from the marginal increase in the rate of Trade Tax it is also to be noted that the amount to be transferred shall be ;

“ …… to the extent to which the state Government deems fit …. “

The amount that is to be transferred should be that which is received and has, by order, been declared as destined for the RF. The permitting of the transfer of amounts as deemed removes any sustainability from the RF.

Discussions with PWD have been unable to shed light on what this 15 digit code is or how it is used.

Whilst it is accepted that responsibility for the works undertaken using the RF should be that of the Engineer in Chief, PWD, all financial and physical reports should NOT be sent to PWD but to the RFMC. End of year accounts should also be sent to the RFMC and not PWD.


February 2008 41


7. Maintenance (1) The detailed statements of expenditures incurred from the Road Fund will be kept separately by the Engineer in Chief, PWD. The State Government will then, from time to time, and as and when requested, be advised as to status. Any balance in the Road Fund at the end of the year will be certified by the competent authority. (2) Under the main PWD head of 8225, the amount Received/Distributed will be published by the Accountant General of Uttar Pradesh, with the estimate of any balance being based on this audit. The financial and administrative approval for projects/plans will be issued by the Road Fund Management Committee. It will be the responsibility of the Engineer in Chief, PWD, to ensure that the expenditure is used only for the works that have been sanctioned.

Given that the administration of the fund is through the SRFMC it would appear that the Engineer in Chief would report on financial expenditure of the fund and not the SRFMC. Given that the SRF does not have a separate account it is unclear as to how Fund balances can be audited.

PWD have been unable to shed any light on this expenditure head nor have they been able to provide any audited accounts as specified.

The SRFMC are themselves unable to monitor both physical and financial progress. Nevertheless the SRF management should have an administrative body that does carry out the day to day work that is required.

8. Any rules relating to the Road Fund constituted earlier will be superseded by the rules included herein.

No additional rules have been identified

9. If there are any suggestions given in future by the office of Accountant General to modify the rules then it will be necessary to include them accordingly.

No suggestions appear to have been documented

7.2 OBJECTIVES OF A ROAD FUND BOARD

The operations of a Road Fund [RF] should be managed by an autonomous body, namely a RF Board [RFB] who would also administer and manage the Road Fund Administration [RFA]. The RFB would have full executive powers. The Objectives of the Board would be to set out and revise the RF objectives; appoint a Chief Executive Officer of the RFA; monitor and evaluate the performance of the RF and, recommend any adjustments and/or amendments to the enabling legislation.

At present, the RF of Uttar Pradesh has what is defined as a Management Committee [RFMC] which at first sight looks to be similar to that of a Board although on closer examination it is to be noted that it is only an advisory body and has no executive powers. Its overall objectives and responsibilities are not clearly stated within the Act of establishment. There is no RFA reporting to the RFMC and it relies entirely on the project implementer [PWD] to provide information as to project implementation. The RFMC is only empowered to recommend the allocation of the proceeds of the RF. Given the advisory role of the RFMC, its recommendations can be over-ruled by the executive of the State.

Kerala Road Fund The Kerala Road Fund Board, established in 2001, has a ten member board, seven of whom are from the public sector with three being nominated by the State Government from the institutions involved in the infrastructure sector. The State Chief Minister is Chairman. The Board is managed by an executive committee with the Minister of Public Works as Chairman of this Committee.


February 2008 42

The reporting of the RFMC does not appear to be established other than that the implementing agency, namely PWD, should keep records of the work undertaken with any funds from the RF and report on these works to the State Government as and when requested. This is not considered to be good management practice and so the following recommendations are made.

1. Consideration should be given to the re-constituting of the RFMC in to the more commonly accepted Road Fund Board. This should be chaired by a senior representative of Government, outside of PWD. It is not clear as to the reason why this was originally established as a management committee.

2. The RFB should report to the Ministry of Finance [MoF], given that its very purpose is to provide the financing mechanism for road related works and, furthermore, the MoF would almost certainly be involved in any approval necessary for any changes in road user taxation.

3. A clear and unequivocal statement as to the works to be funded by the RFB needs to be documented.

4. The RF should be a separate and independent account into which the funds as prescribed by Government are deposited for the administration by the RFB. This should be audited annually.

5. The RFB should provide adequate funds for the annual maintenance expenditure programme put forward by PWD for works as prescribed in item [5] of the Act detailed above. The RFB should also provide funds for what has been deemed periodic maintenance and is included in the planned budget. This programme expenditure should be reviewed by the Board and, in consultation with MoF, the programme that can be financed should then be determined.

6. The RFB, based on information provided by the RF Administration [RFA], should also make recommendations to Government/MoF as to the level of user charges to be paid into the RF. This would need to be substantiated by condition surveys and works cost estimates.

7. The RFB should also be responsible for the effective and timely transfer of funds. The Board should prepare and publish procedures for the disbursement of funds for an approved expenditure programme, with the nature of certification required to ensure that the work has been carried out in accordance with both the contract scope of work and specifications.

8. The Board should aspire to a more commercial/‘business like’ approach to road management in order that it is seen that the funds are being effectively spent and that road user opinion is that there is ‘value for money’ spent. The RFB should therefore prepare and publish audited annual accounts at the end of each financial year, followed by an annual report.

9. The RFB should be the catalyst for enhanced awareness of road users to the impact of good roads. This may help persuade the general public that increased road expenditure, financed through road user charges, is worthwhile. The Board should therefore promote public awareness as to road related expenditures and the levels of charges that would therefore be required to fund such.


February 2008 43

7.3 ROAD FUND ADMINISTRATION

The RFB should be assisted by a Road Fund Administration which should be headed by a Chief Executive Officer. This CEO would be appointed by the RFB to carry out those functions as determined and delegated by the Board. The CEO would act as secretary to the RFB. The RFA would be responsible for the day to day working of the RF and would liaise closely with PWD but would be located separately.

The role of the RFA would be to manage the financial affairs of the RF in accordance with the decisions of the RFB. It would ensure that all funds ascribed to the RF are deposited in the designated account. It would also be responsible for the actual accounts of the fund and for the monitoring of all transactions through the account. It would also be responsible for the preparation of any reports deemed necessary by the RFB.

The RFA would also be responsible for ensuring that all funds are disbursed in a timely manner and that such disbursements are to cover civil works and administration costs as detailed in the approved expenditure programme.

The RFA should also establish sets of performance indicators and other measures to enable the Administration to report on the physical and financial progress of the approved works. The monitoring of physical progress of projects may well need to be outsourced given that the work and skills of the administration will tend primarily towards financial concerns.

At present it appears that the RFMC only meets annually to discuss the allocation of funds. It is considered more appropriate that the RFB should meet on a more regular basis [perhaps quarterly at minimum] to be apprised of the status of work by the RFA. An additional annual meeting may also be required at which the next financial years programme of works, to be funded by the SRF, would be discussed and agreed.

7.4 COMPOSITION OF THE BOARD

It is important that the RFB include representatives of the private sector who may then have a direct influence on both road spending and management. Experience from other countries has indicated that it becomes easier to raise road user charges when there is road user representation on the Board who actively participate in the decisions on expenditure on road infrastructure. It is also of importance that the private sector is adequately represented on the Board given that the very rationale of a road fund pivots on a road users ‘willingness’ to pay for maintenance in return for ‘better service’.

Nevertheless, representation on the RFB should be balanced with members from both the public as well as the private sector. Representation from the public sector is required to provide a linkage between the ministries responsible for roads, transport and maintenance as well as those responsible for revenue collection and road expenditures.

In the case of Uttar Pradesh, the membership of the RFMC is as detailed in Table 1.


February 2008 44

Given the recommendation to re-constitute the existing RFMC into the RFB, the composition of the Board does and will have a major impact on its effectiveness and to that end it is important that the Board have a ‘strong’ chairperson who has the interest of the Board as a first priority and at the same time has sufficient status within the political environment to win support over any potential controversial issues.

The Chairperson could come from either the public or private sector. Whilst it is clear that PWD will have an overly strong interest in the RF it is not recommended that the Chairperson, or Vice Chairperson, be from PWD as this may well be seen as not being representative of road users or the general public as a whole. In addition to the MoF and the PWD it is also important to have representation from the Ministry of Transport given that it will be a representative of the interests of the road transport industry and will have a keen interest not only in the condition of the roads but also in the charges levied on road users.

In reviewing the current ‘make-up’ of the RFMC it is to be noted that some fourteen of the representatives are from the public sector and only eight are from the private sector. Such an imbalance might well be considered to indicate a bias towards the public sector. If and when the RFMC becomes the RFB, consideration might then be given to perhaps reducing the membership from the existing twenty two persons to a more manageable size through the reduction of public sector representation.

A small Board with few members might be more effective but may on the other hand fail to represent key or vital interests in the roads sector. A large Board on the other hand, whilst providing representation from all road sector concerns may suffer from the inability for the Board to convene suitable meetings where all members can attend. Whilst it is therefore important to include representation of key public and private stakeholders, the size of the committee/board should not be unwieldy and a compromise needs to be sought. In other countries worldwide, such considerations have led to Boards having membership of between eight and fourteen persons.

7.5 THE ADMINISTRATION OF THE ROAD FUND

In general the primary objective of the RFMC/RFB should be the administration and management of the Road Fund in accordance with sound commercial principles. In so doing the RFMC/RFB should;

a) Ensure that all funds ascribed to the RF be both collected and deposited into the assigned RF Account. In principle this should be held by a commercial bank.

b) Review the annual expenditure programmes of the PWD in respect to the works that can be funded through the RF. The level of RF funding in terms of projects and financial means require to be discussed and agreed with the Minister.

c) Based on the RF directive to fund a maintenance programme, the RFB should, where necessary and/or required, make representation to the MoF in respect to RF requirements in terms of levies and charges made on road users.


February 2008 45

d) Publish the agreed works programme to be funded by the RF.

e) Publish the procedures for disbursement of funds from the RF to finance the agreed programme.

f) Prepare and publish audited annual accounts. This should be followed by the publishing of an annual report in which performance indicators should be given to highlight the measure of success of the RF programme and should also deal with existing and future policies as they affect the RF.


February 2008 46

8. SUMMARY AND CONCLUSIONS

8.1 ROAD MAINTENANCE

The money generated through the Road Fund is estimated to be sufficient to meet the road maintenance costs once the UP road network is in a 'maintainable condition'.

Currently the road network is not in a stable, or maintainable, condition. As mentioned in the Report the thickness of crust is generally insufficient to meet the current traffic loading. There is a need to strengthen the crust to bring the road network to meet the projected traffic loading. As stated in the Report it is anticipated that it will take some 5 to 10 years to bring the entire road network to a stable and maintainable condition.

This strengthening, which should be based on actual field measurements of the pavement, could be in the form of crushed stone, or bituminous overlay, or any other form, such that strength and costs are optimised. This work will require a major input which should be funded and fully resourced in terms of PWD staff and equipment.

8.2 ROAD FUND MANAGEMENT

Whilst it is commendable that Government has identified the pressing need for the maintenance of highways within the State, less they should incur far greater capital expenditures on rehabilitation / reconstruction of the highways in question, to this end they have established a Road Fund. However, there would appear to be anomalies which, unless they are reviewed and adjusted, could well result in a less than acceptable application of the RF.

It is considered important in this context, to look at the experience with road funds elsewhere and, in particular, second generation funds which are today exhibiting an acceptable measure of success. Based on such, then in terms of structure and process it can be noted15 that the management of the RF should;

(i) have clearly defined legal Executive powers; The Road Fund Management Committee [RFMC] has no executive powers and acts purely in an advisory role. As an advisory committee it can only recommend the level of funds that should be allocated for a works intervention and for which road sections. As an advisory body, its recommendations can be over-ruled by the State executive.

(ii) serve as procurer of services rather than as service provider; Given its advisory role the RFMC neither acts as a procurer of services or a service provider.

(iii) be the representative of consumer interests and run according to sound business practices; The RF Management Committee has some 22 members, of which only 8 positions are from the private sector. It is recommended that the existing public membership be reduced to be in balance with the membership from the private sector. The chairperson and vice chairperson should not be from PWD.

15 See Box 1


February 2008 47

(iv) have governance free from political interference; The management of the RF, as it presently exists, appears to operate as an extension of the PWD and the public sector. For such to operate free from ‘ … political interference …’ it is recommended that an autonomous Road Fund Board be created to manage the RF in line with sound business practices. This RFB should have balanced membership from both the public and private sector and should both report and be accountable to the Ministry of Finance.

(v) be funded by levies or surcharges as user charges and identified separately from general taxation; Under the current process a figure of 6% & 4% of the total Trade Tax of 25% and 21% on petrol and diesel, respectively, is discretely identified for allocation to the RF. This is not a separately identified amount, albeit that the entire Trade Tax on automotive fuels is exclusively a road user charge this is treated as general taxation.

(vi) have revenues paid directly into a fund managed by a [Roads] Board; The actual RF remains a part of the consolidated fund and is therefore allocated as a part of the budgetary process based on the approvals given by the RF Management Committee. A totally separate account should be established with a commercial Bank into which the ascribed funds are deposited.

(vii) be guaranteed security of assigned revenue streams and designated allocation of expenditures; Government has identified a figure of 6% & 4% of the total Trade Tax on Petrol and diesel to be allocated to the RF. It would nevertheless appear that whilst some sums have been allocated to the RF this has not been the total amount available from this levied charge. The Act of establishment for the RF Management Committee states that in allocating the funds to the RF the Government has the prerogative to allocate the;

“…… marginal increase being available for the Road Fund to the extent to which the State government deems fit.”.

The key to any successful application of a RF is sustainability of income to the fund. The amount generated from the marginal increase in Trade Tax has been ascribed to the Road Fund by the Act and the full amount should therefore be allocated to the Fund. The allowing of discretionary power as to the amount that may be allocated to the fund could mean that at some time in the future no funds might be allocated and any planned programme of road maintenance would need to be deferred, to the detriment of the user who has paid a user charge for the maintenance thereof.

(viii) focus on road financing management, the setting up of a level of road fee, allocating procedures of the dedicated revenues, selecting expenditure priorities based on economic analysis, rather than the provision of road works and services; As previously noted, the RFMC has no executive powers and acts purely in an advisory role. As such it does not focus on the management of road financing, establishing levels of user charge, nor the allocation of dedicated funds. The RFMC is not an autonomous body with its recommendations effectively requiring State executive approval.

(ix) undertake independent monitoring of performance for flow of funds as well as the quantity, quality and cost of road works. Again, as an advisory body on the allocation of funds, the RFMC does not monitor performance although the Engineer in Chief PWD is


February 2008 48

required to keep separate details of expenditures incurred in relation to the RF and provide progress reports as and when required by State Administration

8.3 THE ROAD FUND REQUIREMENT

Whilst explicit data on the condition of the network is not available by individual road section, an analysis has been undertaken based on the prima face assumption that all roads require strengthening before they can be included in a maintenance programme, with the one exception of externally funded projects.

The results of various analyses have indicated that the marginal increase in Trade Tax applied to automotive fuels is sufficient to cover the maintenance requirements of PWD. No increase in road user charges is therefore recommended although consideration will need to be given to the use of CNG. If large numbers of vehicles do transfer to this new type of fuel and away from conventional fuels, revenues for the SRF could decline. A compensatory marginal increase on this fuel may therefore need to be levied at some time in the future.

Given the above, the following first step recommendations are therefore identified;

1. The existing RFMC should be removed and an autonomous Road Fund Board be established with full executive powers for the administration of the Road Fund. This should not be chaired by a representative from PWD. The membership of the Board should comprise equal numbers from both the private and public sectors. The newly established RFB should report directly to the Ministry of Finance.

2. A clear and unequivocal statement as to the works to be funded by the RFB needs to be documented. Whilst governments roads policy identifies that the RF should be used for road maintenance, the Act of establishment appears to suggest that the RF can be used for all road related works.

3. A separate annually audited independent commercial account should be established into which the prescribed funds are deposited. Given that the collection of Trade Tax and its payment to the exchequer is a continual process throughout the year, and presumably on a monthly basis, then payments to the SRF should also be on a monthly basis.

4. A separate RF Administration should also be established to undertake the day to day running of the fund as well as the management/administration of other matters, such as; performance monitoring; fund requirements; levels of user charges; public awareness etc.

5. Both annual audited accounts and an annual report should be published in order that it is seen that the funds are being effectively spent and that road user opinion is that there is ‘value’ for the money spent.


February 2008 49

9. FOCUS GROUP MEETING

Focus Group meeting was held on 20th February 2008 to discuss Report No. 5.

The members of the Focus Group discussed the Report in detail and mentioned that the following points should be included:

• The road network is not in a maintainable condition. It will require at least 5 to 10 years to bring it to a maintainable standard. A detailed project level analysis is required to know the exact condition of the entire road network, for which a detailed inventory is mandatory along with the condition surveys.

• Roads having inadequate crust thickness and not fit to receive periodic renewal should not be included in a periodic renewal programme. Such roads should be included for strengthening after carrying out proper investigations and testing.

The above suggestions have been incorporated in this Final Report, as part of Section 8.1.

Apart from discussing Report No. 5, consensus was also reached for Report No. 3 and Report No. 29, which had already been issued as Final Reports.


February 2008 50

10. PRESENTATION TO PROJECT STEERING COMMITTEE

UPSRP IDS

Report No 5 : Implementation of GoUP decisions on Revised Taxes / Surcharges for Road FundReport No.5 : Implementation of GoUP decisions on Revised Taxes / Surcharges for Road Fund

PWD Focus Group - ASri S.K. Guni CE, Allahabad Zone, AllahabadSri Govind Prasad Sharma EE Health System Development Project, LucknowSri Vinod Kumar Bansal EE, PMGSY Cell, LucknowSri Vasudev T Gulwani EE RSD 5 LucknowSri Vasudev T Gulwani EE RSD- 5, LucknowSri Sanjay Gupta AE W, B-1, LucknowSri R.P Yadav AE P.D. Kanpur NagarSri Yogesh Mathur SE, BulandshaharSri Anay Kumar Srivastava AE, IDS Cell

LEA International Ltd and LEA Associates South Asia Pvt LtdLEA International Ltd. and LEA Associates South Asia Pvt. Ltd.Mr. Trevor G Snellgrove Road Financing / Fund Specialist

1

UPSRP IDSReport No.5 : Implementation of GoUP decisions on Revised Taxes / Surcharges for Road Fund

BACKGROUNDBACKGROUND

TCE Study (2000 – 2002) brought out the concern :

“undertook a review of sustainable road network funding and it wastheir concern at that time that, over the initial years there would be ayfunding gap. On the basis of this concern tax increases wererecommended”

2


Terms of Reference for the TA

Objective Decisions already t k Progress Action Requiredj taken g q

1D Adequate and sustainable UP Road

GoUP agreement to review Road Fund revenue scope

GoUP request for cross State study of road related taxes and

1.PWD & Transport Department to formulate and implement comparative study October 2002UP Road

Fundingrevenue scope, including access to vehicle tax and vehicle insurance

road related taxes and leviesIncreased road funding being pursued

comparative study – October 20022.Implementation of GoUP decisions on revised taxes / surcharges for Road Fund – March 2003

surchargesg g p

in 10th Plan process1E Effective sector

GoUP agreement, post IDS to widen

GoUP ‘in principle’ agreement to enhance

1.Finalise GoUP decision on new RFMC nominees – April 2002

participation in UP roads financing & management

membership of UP Road Fund Management Committee [RFMC]

workings of RFMC 2.Implement GoUP decisions on outcomes of consultative study on enhanced RFMC role/s, resources and processes – March 2003management Committee [RFMC] and processes – March 20033.Inaugurate annual stakeholder Road Forum to review road sector performance – June 2003

3


This Report was to be a review of the comparative multi-stateThis Report was to be a review of the comparative multi statestudy [to be executed by PWD and the TransportDepartment] on road related taxes, levies and surcharges,the recommendations of the study and, the implementationprogramme.

However in the event multi State study was not undertakenHowever in the event multi-State study was not undertaken.

4


Report reviewsReport reviews

1. Road Funds in generalg2. Funding requirements within the State of UP3 Current sources of revenue for the Road Fund and overall3. Current sources of revenue for the Road Fund and overall

road sector revenues4 Management operation and procedures of the Road Fund4. Management, operation and procedures of the Road Fund

5


1 Road FundsA Road Fund is an institutional mechanism which allows selected revenues tobe placed at the disposal of a Road Department with these being outside thegeneral budgetary reviews and procedures The revenue generated by the Roadgeneral budgetary reviews and procedures. The revenue generated by the RoadFund can only be used for ROAD MAINTENANCE.

“first generation” - not been entirely satisfactory. Often did not achieve theirgoals due to poor governance, collection and disbursement, and inadequatecontribution to the fund for yearly maintenance of the road networkcontribution to the fund for yearly maintenance of the road network.

“second generation” - importance of road maintenance recognised. Developedt t i li ti f d t hil t i i thto support commercialisation of road management, whilst increasing thedomestic resources available for road maintenance. Also designed to increaseefficiency of resource allocation and use.

6


In past road maintenance suffered from :

• shortages of financial resources and

• general allocation of low priority, in comparison to that of capacitygeneral allocation of low priority, in comparison to that of capacity expansion and all weather road construction

Maintenance is considered a ‘Non- Plan’ activity, so not surprisingthat budget allocations are cut due to fiscal shortages.g g

In the light of such budget cuts and maintenance deferment theearmarking of road funds to ensure a stable/sustainable flow ofearmarking of road funds to ensure a stable/sustainable flow offunds has become a popular concept.

7


Creation of Road Fund in Uttar Pradesh - established in 1998.

The 1998 UP Road Development Policy clearly stated:

“3 3 A road fund for the maintenance of roads in the State has3.3 A road fund for the maintenance of roads in the State hasbeen created the accruals from the increase in the rate of TradeTax on Diesel and Petrol will be credited to this fund.”

Revenue for the Road Fund is specifically generated through alevy on fuel Trade Tax on Motor Spirit [Petrol] is 25% and onlevy on fuel. Trade Tax on Motor Spirit [Petrol] is 25% and onDiesel 21%. Of this Trade Tax on automotive fuels, 6% for Petroland 4% for Diesel has been allocated to the Road Fund.

8


2 Funding Requirements:2 Funding Requirements:

Routine maintenance:Routine maintenance:

‘On carriageway’ work: repairing potholes, sealing cracks, gradingshouldersshoulders,‘Off carriageway’ work: cleaning culverts and ditches, repairing /replacing road signs and kilometre stones clearing roadsidereplacing road signs and kilometre stones, clearing roadsidevegetation.Routine maintenance also includes minor repairs on bridges andRoutine maintenance also includes minor repairs on bridges andother structures.

9


Periodic maintenance:

The standards adopted over the years for what PWD term as therenewal length of a highway [periodic maintenance] is identified asrenewal length of a highway [periodic maintenance], is identified asa percentage of the network for each road category. This renewalcycle takes no cognisance of the condition of the road and thecyc e a es o cog sa ce o e co d o o e oad a d erenewal, or periodic maintenance, is therefore a time rather thancondition based intervention.

10


Special repairs

Can be considered as emergency repairs.

11


The current system for maintenance does not reflect the actualThe current system for maintenance does not reflect the actualcondition of any particular road section.

In addition, the maintenance treatment applied to each roadcategory does not take account of:

t ffi iti• traffic composition,• vehicle damage factors,• residual pavement life nor• residual pavement life nor,• structural strength,

All are essential elements in the determination of the appropriatemaintenance intervention.

12


3 Sources of Revenue

• Charges levied on vehicles: direct taxes applied to road users in UP, knownas motor vehicle taxes, are applied either as a ‘one off’ tax on a private vehiclesor as a quarterly charge on all commercial vehicles.q y g

• Fees levied on road users: The Transport Department applies fees on roadusers for various forms and documentation.

• Road user penalties: The Traffic Department collects penalties issued ondrivers and their vehicles with respect to compliance with the Motor Vehicles Act.

P lti i d t hi l Thi lti d th h th• Penalties assigned to vehicles: This covers penalties recovered through thecourts as well as those through the Department.

• Charges levied on use: By far the largest road user charge is represented byCharges levied on use: By far the largest road user charge is represented bythe Trade Tax applied to automotive fuels, which is 6% in the case of petrol and4% in the case of diesel on the price of a litre of fuel.

13


A th i th hi l fl t ill l t t i l hAny growth in the vehicle fleet will almost certainly have animpact on the sales of automotive fuels as more road users jointhe ‘vehicle fleet’ This growth can therefore be used as athe vehicle fleet . This growth can therefore be used, as asurrogate for the growth in sales of automotive fuels.

14


Developing a Programme and Analysis

15


16


17


18


February 2008 i

ANNEXURE - A : ESTABLISHED ROAD FUNDS IN AFRICA

Benin Ethiopia Kenya Zambia

Road Fund Composition

Road Fund Board Represented Ministries Rural Development Ministry Planning and Economics Restructuring Ministry Environment, Housing, and Urbanism Ministry Civil Service, Labour and Administrative Reform Ministry User Groups Agriculture Chamber, Commercial Chamber, Transporters organisations Operators Drivers organisation The RF Board is supported by a Secretariat, consisting of three professional staff: Director, contracted by the Board for a three year renewable period; Accountant and Management Controller, selected and contracted by the Director also for a renewable three-year period.

Road Fund Administration The Road Fund is managed by a Board consisting fifteen members; • the chairperson • four representative members

of the federal government, • six regional and municipality

representatives and,

• four members from the private sector.

Board members are selected by appointment for a fixed term of two years. They hold regular quarterly meetings and are governed by the Board’s directive on procedures and code of conduct. The office of the Road Fund Administration (Secretariat) is responsible for the day-to-day management of activities with an approved maximum staff of 27. The administrative and operational budget for the Secretariat is allocated from the Ministry of Finance. The Secretariat is divided into three dept’s; administration and finance; planning, programming and budget and, audit and technical inspection. It is headed by a General Manager who reports to the Board.

Roads Board The Board comprises: - A chairman and an executive

director; - Five Permanent Secretaries of

relevant ministries; - Seven nominated members

from: the Institution of Engineers of Kenya, the National Chambers of Commerce and Industry, the Institute of Certified Public Accountants of Kenya, the Automobile Association of Kenya, the Institute of Surveyors of Kenya, the Kenya National Farmers Union, the Kenya Association of Tour Operators, and the Kenya Transport Association.

The chairman is appointed from the private sector.

The National Roads Board The Board of Directors of NRB is appointed by the Minister of Communications and Transport NRB is composed of eleven members, of whom seven are from the private sector and road users’ groups, representing the Chartered Institute of Transport, Chambers of Commerce and Industries, Engineering Institution, Automobile Association, Transporters’ Associations, National Farmers’ Union, and University. Permanent Secretaries, or their nominees, represent the public sector from Ministries of Communications and Transport, Works and Supply, Local Government and Housing, and, Finance and Economic Development. The representatives of government ministries have no vote and the Board chooses its own chairman and vice-chairman.


February 2008 ii

Benin Ethiopia Kenya Zambia The Board reports to a Committee

of Ministers comprising the Minister of Transport and Communications (chairperson), Minister of Works and Supply, Minister of Local Government and Housing, and Minister of Energy and Water Development. It is supported by a Secretariat, consisting of eight staff in the functional areas of administration, procurement, engineering, and finance. The Secretariat is also assisted by the Management Support Services team, comprising two full-time and two part-time consultants.

Function of the Board

i. implement RF global policy as laid down by the Review Council;

ii. receive financial evaluation reports;

iii. propose and justify changes to RF levels; and

iv. manage controls, audits and inspections.

v. The Director is responsible for the management and disbursement of the RF and, the execution of the decisions made by the Review Council and the Management Committee on a day-to-day basis

i. administer the fund; ii. issue directives to define

collection and disbursement procedures;

iii. review annual road maintenance programs of the road agencies and offer advice on co-ordinating design of the programmes;

iv. submit annual proposals to the government on programmes to be financed by the fund and, allocate the funds;

v. review management reports of the road agencies;

vi. initiate financial and technical audits and road safety related activities;

The Roads Board is empowered with resource generation and allocation, planning, programming, and evaluation responsibilities for the road network, with user representation. There is also a secretariat

The National Roads Board (NRB) functions as a procurer of services rather than the provider of services. It is a financing agency vested with responsibility for managing the RF. This includes; i. ensuring public roads are

maintained and rehabilitated as required;

ii. raising the required funds for adequate maintenance and rehabilitation of public roads;

iii. advising the Committee of Ministers on the preparation and efficient implementation of the annual roads programme.

iv. Recommendation of the road tariff;


February 2008 iii

Benin Ethiopia Kenya Zambia vii. make recommendations to

government for additional revenue sources and the level of tariffs required to finance road maintenance programmes;

viii. advise government on policy matters.

v. allocation of funds to executing agencies;

vi. provision of advice on the setting of standards;

vii. the classification of roads and; viii. provision of advice on the

creation of highway authorities to act as executing agencies for the work funded by the RF;

ix. review the proposed road expenditure plan and decide how much is affordable, and;

x. recommend the level of road tariff to the Ministry of Finance;

xi. manager of the ten-year road sector investment programme.

Sources of Funds

Allocated resources: Vehicle use tax Gasoline tax Road tax Value Added Tax - customs Agricultural and mines

product tax Own resources:

Concession payments tolls and weight controls

Returns on investments Other Allocations:

From the State From donors External contributions Grants Local loans

government budget; fuel levy, vehicle license renewal fee, overloading fines, and, other road tariffs.

The fuel levy is a fixed amount and is derived from an incremental charge, comprising a sales and municipality tax. This forms a part of the governments contribution to road maintenance.

All proceeds from the Road Maintenance Levy and other sources are to be deposited in the Roads Fund. The Road Maintenance Levy is an amount charged on the sale of diesel and gasoline and also those charges levied on foreign registered transit vehicles.

In the past, road operations were centrally planned activities undertaken by government roads using force account. especially for road. Funding relied on treasury allocations and donor contributions. Focus was on capital expenditure with little allocation for future maintenance needs. The RF was established, with a fuel levy being the main funding source. This is a percentage of the wholesale price of fuel. Other sources of funds include; international transit tolls, weigh bridge fines, motor vehicle license fees.


February 2008 iv

Benin Ethiopia Kenya Zambia The fuel levy is set at 10 percent of the wholesale price, of which 92 percent is remitted to the RF for petrol and 100 percent for diesel.

Stability in Financing

The allocated taxes are channelled to the Road Fund account through the Ministry of Finance (MoF) and are based on their forecasted use during the year. There have been delays in the flow of funds between treasury and the road fund.

Revenue from fuel levy, sales tax, and municipality tax is deposited directly by the Petroleum Enterprise into the Road Fund account.

The Road Maintenance Levy Fund forms part of the recurrent budget, and payments are made on a weekly basis to the Roads Board Fund by Government.

The danger of setting the fuel levy as a percentage of wholesale price is that collections may bear no relation to maintenance needs and RF revenues may fluctuate with changes in the economic climate. The petroleum enterprise credits amounts to the Revenue Authority who then credit budgeted amounts to the RF through the Ministry of Transport & Communications. There have been delays in funding the account. Budgeted amounts are more often less than the proceeds from the levy resulting in arrears to the RF.

Performance The RF Board has been successful in protecting the flow of funds and stabilising resources for road maintenance. It has been able to provide more than 80 percent of the assessed maintenance needs of the road network. The critical issue is not the adequacy of the road fund but the absorptive capacity of the road executing agencies in carrying out the maintenance works.

Operational functions have been decentralised by empowering the districts to implement and manage their maintenance activities. In the past, monthly resource allocations to the Roads Authority were made from the government central budget, based on a cash flow and independent of the works carried out. There were no instruments in place to monitor the performance of works in relation to expenditures made.

Evidence suggests that, although substantial additional funding has been generated from road-users through the road maintenance fuel levy, road users appear to have received poor value for money, which casts doubt on the sustainability of such a dedicated funding mechanism. Funds have been allocated with little economic priority and in some instances, in non compliance with the works contract.

The ability of the NRB to manage the Road Fund is compromised by an absence of a framework for annual planning, programming, and budgeting. There is no financial and accounting procedures guidelines. Programme management is constrained by delays in the reinforcing capacity of the NRB.


February 2008 v

Benin Ethiopia Kenya Zambia RFA monitors the Roads Authority performance based on the payment certificates which are verified by the Authority before submission to the RFA for payment One of the functions of the RFA, specified in the Act, relates to the technical and financial audit of each of the road agencies for the works financed by the Road Fund. The RFA is required to undertake both a technical and financial audit of the federal, regional, and municipal road agencies. A separate RF account is to be established in each

Shortcomings include; Despite expenditure of 95% of contract values some works were not carried out; workmanship is poor; contract management has been poor; variation contracts have not ensured: availability of funds; a competitive bidding process and, that the works have been undertaken. The evaluation process is also not transparent. Available funding continues to be spread over a very large number of projects, making it difficult for road users to perceive any improvement in road condition.

Despite their efforts in securing periodic increases in the fuel levy, the Board has not been totally successful in obtaining the level of road tariff adequate to fully fund road maintenance. RF accounts are prepared on a quarterly basis and audited by an independent external auditor. Planning and programming are dependent on an outdated Highway Management System and inadequate current network data


February 2008 i

ANNEXURE - B

Government of Uttar Pradesh

Public Works Department

Section-1

Notification

January 1, 2000

No. 5059/23-1-99-25-CG-97-T.C. (4)- Under New Road Development Policy announced in 1998 by State Government for planned development of roads in state, preference has been given to maintenance of roads and a “Road Fund” has been constituted for maintenance. Under Road Development Scheme, “Road Fund” established for maintenance, repairs, strengthening etc. works of roads in state and for its operation, “Road Fund” Rules are hereby accorded by His Excellency Governor of State.

(2) Honorable State Minister, Vice-President Public Works Department (3) Commissioner of Agricultural Production Member (4) Chief Secretary Member Public Works Department (5) Chief Secretary Member Finance Department (6) Two Parliamentarians Member nominated by State Govt. (7) Two District Assembly Chairman Member nominated by State Govt. (8) Chief Secretary Member Health Department

Road Fund Rules 1. Name of this fund will be “Road Fund” 2. Sources of Income- The income from the increase in the rate of trade tax from the existing value of 14 percent and 16 percent on this 1st sale of MOTOR SPRIT, DIESEL OIL and ALCOHOL, under the trade tax modification (1998) will increase this to 20 percent for both Motor Spirit and Diesel with the marginal increase being available for the Road Fund to the extent to which the State government deems fit. Should Government decide to allocate any other income source to the “Road Fund”, then that income will also be deposited into aforementioned “Road Fund” account. 3. Objectives- The amount available under this fund will be utilized on maintenance, repairs and strengthening of roads within the State. 4-Conditions- The use of the funds made available under this Road Fund, will be determined in accordance with the decisions taken by Road Fund Management Committee. The Committee will decide on the points relevant to the ‘process of meetings’ such as, times of meetings and ‘quorum’ etc. The “Road Fund Management Committee” will comprise the following members: - (1) Honorable Minister, President Public Works Department

(9) Chief Secretary /Secretary Member Department of Industrial Development (10) Chief Secretary/Secretary Member Transport Department (11) Chief Secretary/Secretary Member Tourism Department (12) Two Representatives of state level Truck Member Motors Association 5. Work Area- The monies available in the Road Fund will be used, to the extent possible, for the maintenance and repair of all roads within the state under the Non Plan budget head. 6. Process of Accounts and Finance- (1) Amount for Road Fund will be received from Grant No. 58 of Public Works Department under provisions of Income-Expenditure of Account Head “3054-For Roads and Bridges Non-Planned -80 General-797-Reserved Fund/Transfer from Deposit Accounts-05-Transit To Road Fund-35-Under Account Transition. .


February 2008 ii

So under Uttar Pradesh Motor Spirit, Diesel Oil and Alcohol Sales Taxation Amendments (1998), by increased rates of taxes on first sales / Income from other sources will be transit to Road Fund by such extent as Sate Government think suitable or amount will be transited from Revenue Accounts to Road Fund and the amount will be Passed /Spend under Grant No.58.The amount equivalent to expenses incurred from Grant will be Shown as “Part 4- Recoverable”. So that the amount equivalent to expenditures made under Grants will be shown in Co-distribution through various account heads - 8225-Road and Bridges Fund, 101- State Road & Bridges Fund, 01-State Road fund, 0101-Transfer from Revenue Accounts as eventually they are to be borne by Road Fund. (2) Chief Engineer, Public Works Department will be responsible for executing correctly all the works regarding to maintenance and repairs of roads funded by “Road Fund” and for that he has to keep on monitoring in all aspects. He also has to send a statement on Financial and Physical progress to Public Works Department. At the end of financial year. He has to send entire statements regarding financial and physical progress with other important information to section of Public Works Department of State Government. 7. Maintenance (1) The detailed statements of expenditures incurred from above said fund will be kept by Chief Engineer, Public Works Department and to inform all that to the State Government as per their requirement by time to time. The balance amount in accounts of Road Fund at the end of the year will be certified accordingly by competent authority. (2) Under main head of Public Works “8225” receipts/ co-distribution amount will be published by Accountant General of Uttar Pradesh. Estimation of balance amount will be based on that. The Financial & Administrative approval will be issued for projects/plans which are accorded by management committee. It will be responsibility of Chief Engineer, Public Works Department, to utilize the amount for the same purpose for which they have been provided.

8. The rules related to Road Fund constituted earlier will be assumed as encroached after declaration of these rules. 9. If there are any suggestions given in future by the office of Accountant General to modify the rules then it will be necessary to include them accordingly

By Order

Laxmi Chand Chief Secretary


February 2008 i

ANNEXURE - C

Government of Uttar Pradesh

Public Works Section-1

No.1424/23-1-02--25CG/97TC-4

Lucknow: Dated-May13, 2002

1. For the purpose of planned development of roads in state, in year 1998 the State Government has set up a “Road Fund” for maintenance, repairs and strengthening of roads under Road Development Policy and for its operation by making amendment in the management committee declared by “Road Fund Rules” constituted as per Draft Para No.4 of Notification No.5059/23-1-99-25 C G /97 TC-4 dated January 1,2000, is hereby approved by His Excellency ,Governor of State to be established as follows :-

1. Honorable Minister, Public Works Department President 2. Honorable State Minister, Public Works Department Vice President 3. Two Parliamentarians nominated by State Government Member 4. Two Legislators nominated by Uttar Pradesh Legislative Assembly Member 5. Two President’s of District’s Panchayat nominated by State Gov’t Member 6. Commissioner of Agricultural Production, Uttar Pradesh Member 7. Chief Secretary/Secretary, Industrial Development Deptt. Member 8. Chief Secretary, Public Works Department Member 9. Chief Secretary, Finance Department Member 10. Chief Secretary/Secretary, Transport Deptt . Member 11. Chief Secretary/Secretary, Tourism Deptt, Govt. of U.P Member 12. President/Secretary of State Truck Association Member 13. President/Secretary of State Motor Buses Association Member 14. Director-General of Society of Indian Automobile Manufacturers, Member or any Director nominated by him 15. New Delhi located Chief Representative of Travel Agent Assoc’ Mumbai Member 16. Lucknow located Assistant Director General of Oriental Insurance Co,. Member 17. Director of Confederation of Indian Industries (C.I.I), U.P. Lucknow Member 18. Coordinator for Road Safety Centre of Central Institute of Road Member Transport, Pune. 19. Engineer-in-Chief, Public Works Department, Uttar Pradesh Member/Secretary


February 2008 ii

2. Notification No.5059/23-1-99-25CG/97TC-4 dated 1-1-2000 is hereby amended to the extent as above. Other conditions will remain same.

By Order V.K.Singh (Secretary)

No.1424 [1] 23-1-2002 Dated

--------------------------------------------------------------------------------------------------------------------------------- Copies send to following for information and needful action:- 1. Accountant General (Accounts & Entitlement), Second, Allahabad, U.P. 2. All Chief Secretaries/ Secretaries of Government. 3. All Commissioners/District Magistrates, Uttar Pradesh. 4. Engineer-in-Chief, Public works Department, Uttar Pradesh, Lucknow. 5. All Chief Engineers, Public Works Department, Uttar Pradesh 6. Finance (Expenditure Control) Section-8/Finance (Income-Expenditure) Section-1 7. Director, Government Press & Stationery, Uttar Pradesh, Allahabad, with motive that they

kindly publish question wise amended Rules in upcoming “Government Gadget” and available 500 copies of rules to Public Work Section-1 of Government by publishing.

By Order Raj Kumar Singh Undersecretary


February 2008 i

ANNEXURE - D : VEHICLE TAX TABLE - DEPARTMENT OF TRANSPORT

Sr. No. Vehicle Type Charge

Private Vehicles One Time Charge

1 Moped 800 Rs

2 Scooter / Motorcycle 1,500 Rs

3 Car / Jeep [Petrol] 2.5% of value

4 Car / Jeep [Diesel] 5.0% of value

5 Trailer for Vehicles [3] & [4] 605 Rs

6i Car / Jeep with unladen weight above 5,000 kgs – Petrol 2.5% of value PLUS 5,324 Rs for every 1,000kgs, or part thereof,

above 5,000 kgs

6ii Car / Jeep with unladen weight above 5,000 kgs – Diesel

5.0% of value PLUS 5,324 Rs for every 1,000kgs, or part thereof,

above 5,000 kgs

7 Trailer for vehicles [6i] & [6ii] 1,210 Rs

Transport Vehicles Quarterly Charge

1 Autorickshaw with seating capacity of not more than 3 persons excluding the driver 95 Rs

2 Autorickshaw with seating capacity of 4 persons excluding the driver 185 Rs

3i Three wheelers with seating capacity of more than 4 persons but no more than 6 persons excluding the driver 185 Rs

3ii Others with seating capacity of more than 4 persons but no more than 6 persons excluding the driver 230 Rs

4i With a seating capacity of more than 6 persons but no more than 12 persons excluding the driver – for ‘A’ Class Routes

350 Rs

4ii With a seating capacity of more than 6 persons but no more than 12 persons excluding the driver – for ‘B’ Class Routes

250 Rs

5a With a seating capacity of more than 12 persons but no more than 20 persons excluding the driver – for ‘A’ Class Routes

5ai For the first 12 Seats 350 Rs

5aii For every additional seat thereafter 30 Rs

5b With a seating capacity of more than 12 persons but no more than 20 persons excluding the driver – for ‘B’ Class Routes

5bi For the first 12 Seats 350 Rs

5bii For every additional seat thereafter 25 Rs


February 2008 ii

Sr. No. Vehicle Type Charge

6 With a seating capacity of more than 20 persons but no more than 35 persons excluding the driver – for ‘A’ Class Routes

6ai For the first 20 Seats 590 Rs


6b With a seating capacity of more than 20 persons but no more than 35 persons excluding the driver – for ‘B’ Class Routes



7a With a seating capacity of more than 35 persons excluding the driver – for ‘A’ Class Routes

7ai For the first 35 Seats 1,150 Rs


7b With a seating capacity of more than 35 persons excluding the driver – for ‘B’ Class Routes



8i Goods carriage for every metric tonne of GVW or part thereof – For one region only 70 Rs per MT or part thereof

8ii Goods carriage for every metric tonne of GVW or part thereof – For more than one region 85 Rs per MT or part thereof

Additional Tax charges Quarterly Charge

1 Additional tax on Goods carriers on hilly routes 210 Rs per MT of GVW or part thereof

2 Additional tax on Goods carriers on flat routes for one region

85 Rs per MT of GVW or part thereof

3 Additional tax on Goods carriers on flat routes for more than one region

110 Rs per MT of GVW or part thereof

4 Additional tax on all goods carriers carrying - agricultural produce, minerals and petroleum products

50% of he additional tax rate in items [1], [2] & [3] above


February 2008 i

ANNEXURE - E : ROAD TRANSPORT FEES – DEPARTMENT OF TRANSPORT

Item Description Fee

1 Learner License 30 Rs

2 Permanent Driving License 40 Rs

3 Permanent Driving License [Laminated Card] 200 Rs

4 Renewal of Driving License 50 Rs

5 Driving Test 50 Rs

6 Conductor License Fee 50% of Driving License fee

7 Endorsement of Laminated card with new class of vehicle 200 Rs

8 Renewal of Driving License after expiry of ‘Grace’ period 30 Rs

9 Registration / Renewal of Driver Training School 2,500 Rs

10 Second copy of Registration / Renewal of Driver Training School 2,500 Rs

11 Appeal against orders of the Licensing Authority 100 Rs

12 Trade certificate [Motorcycle] 50 Rs

13 Trade certificate [Invalid carriage] 50 Rs

14 Renewal of Trade certificate [Motorcycle / Invalid carriage] 50 Rs each

15 Others 200 Rs

Issue of Registration book / Renewal / Allotment of new number

16 Invalid carriage 20 Rs

17i LMV – Non transport 200 Rs

17ii LMV – Light commercial vehicle 300 Rs

18 Medium passenger vehicle 400 Rs

19 Heavy passenger vehicle 600 Rs

20 Imported motorcycle 200 Rs

21 Motorcycle 60 Rs

22 Medium goods vehicle 400 Rs

23 Heavy goods vehicle 600 Rs

24 Imported motor vehicle 800 Rs

25 Issue of duplicate registration document 50% of above fees

26 Transfer of ownership 50% of above fees

27 Change of address 20 Rs

28 Alterations to Registration Book 50 Rs

29 Hire purchase / lease / hypothecation entry fees 100 Rs


February 2008 ii

Item Description Fee

Technical Fitness Test Fee

30 Two / Three wheeled vehicle 100 Rs

31 Light motor vehicle 200 Rs

32 Medium vehicle 300 Rs

33 Heavy vehicle 400 Rs

34 Grant / Renewal of fitness certificate 100 Rs

35 Issue / Renewal of authority letter 5,000 Rs

36 Issue of duplicate copy 5,000 Rs

37 Appeal under Rule 70 400 Rs

Fees for Temporary Permits / Renewal & Endorsement

38 For first 3 days 300 Rs

39 After first three days and up to end of week 300 Rs

40 For the subsequent week or part thereof 300 Rs

41 Change of vehicle type as specified in the permit 180 Rs

Taxi / Autorickshaw / Tempo plying regularly

42 For one region 750 Rs

43 For all other regions 1,500 Rs

Fees for Permits other than Temporary Permits, their Renewal & Endorsement

44 Stage or contract carriage other than a motor cab 6,000 Rs

45i Motor cab for all India 2,500 Rs + 500 Rs

45ii Motor cab for all UP 1,500 Rs

45iii Motor cab for one region 750 Rs

46 Goods carrier 4,800 Rs

Documents

UTTAR PRADESH STATE ROADS PROJECT Under …Final).pdf · · 2016-08-20UTTAR PRADESH STATE ROADS PROJECT Under IBRD Loan No. 4684-IN ... CF Consolidated Fund MIS Management Information