The government has put in place a financing plan for Kamal Nath’s ambitious road development programme of building 20 km a day by allowing the transfer of Rs 10,000 crore raised by the India Infrastructure Finance Company Limited (IIFCL) to the National Highways Authority of India (NHAI), agreeing to provide financial support through cess on petrol and diesel for another 20 years and approving to extend government guarantee to tax-free bonds issued by the NHAI.

Backed by support from the Prime Minister’s Office (PMO), finance ministry and Planning Commission member BK Chaturvedi said ‘in principle’ approval for the same has been notified under the Revised Strategy for implementation of the National Highways Development Project (NHDP) on November 5, 2009.

IIFCL was allowed to raise Rs 30,000 crore as part of the fiscal stimulus package to finance long gestation infrastructure projects worth Rs 1,00,000 crore. The funds were raised by the IIFCL through tax free bonds at a cost of 7.1 per cent, which remain un-utilised so far even though the infrastructure finance company has provided loans to over 70 projects in power, roads, ports etc since its inception in 2006.

In addition, the government has given ‘in principle’ approval to provide a letter of comfort from the ministry of finance confirming the availability of cess at least till 2030-31. The government currently imposes a cess of Rs 2 on petrol and Re 1 on diesel to provide finance for development of roads and highways. As much as Rs 3,000-4,000 crore becomes available annually through this means depending on the average price of petrol and diesel in the year.

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