FinMin explores cut in road ministry’s budget allocation

At a time when Union Road Minister Nitin Gadkari has spelt out an ambitious plan to execute highways projects, including Bharatmala, at an estimated cost of ~7 lakh crore, the finance ministry is mulling over a reduction in its budgetary allocation. The move is possibly a reaction to under-utilisation of funds allocated in the Budget 2017-18, a source in the government said.

It is learnt that the Ministry of Road Transport and Highway’s budgetary allocation for the current financial year may be reduced by seven per cent amounting to ~6,000 crore, as the National Highways Authority of India (NHAI) would not be able to spend it. The ministry is, however, building a case against the cut and may finally prevail on the finance ministry.

This may not be a solitary case of a reduction in budgetary allocation, some seven months into the financial year. A similar proposal may be in the works for other infrastructure ministries including railways, power, telecom, and aviation.

When asked about the proposal, Finance Secretary Ashok Lavasa said, “Normally, the finance ministry would reduce the allocation for a particular ministry depending on the expenditure made by it.” He did not elaborate on any proposed cut for the road ministry.

The Union Cabinet on Tuesday cleared the Bharatmala project to construct 20,000 km of highways connecting western and eastern parts of the country.

The project would be funded through various sources, including ~2.09 lakh crore from the market, ~1.06 lakh crore through private investment and ~2.19 lakh crore from the central road fund or toll collection. In the first phase of the project, the Central government plans to construct ~5.5 lakh crore worth of projects in the next three-five years, according to a road ministry official. The average cost of constructing 1 km of road is ~13 crore.

The National Democratic Alliance government is under constraints due to slow pick-up in revenue collection while there is a demand for increased spending to stimulate the economy. The finance ministry wants to stick to its fiscal deficit target of 3.2 per cent of GDP for 2017-18. For this, a reallocation of resources is considered a better option than increased spending. Finance Minister Arun Jaitley had allotted ~83,170.59 crore for the Ministry of Road Transport and Highways for the current financial year. Of this, ~64,900 crore was to be spent by the ministry itself and the remaining by the NHAI.

The budgetary allocation for the highways sector was revised downward in FY17 as well, since the ministry was unable to spend the amount allocated to it at the time of Budget presentation.

The total amount allocated for the Ministry of Road Transport and Highways and the NHAI has seen a decline over the past few years as they were unable to spend the funds.

In FY16, the actual allocation for the road ministry and the NHAI was ~51,017.68 crore, and the budgetary estimate for FY17 was ~78,932 crore, which was revised downward to ~74,255.60 crore.