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Final Assessment Report Himachal Pradesh Road Sector Finance Study Final Assessment Report PwC December 2006 Table of Contents 1 INTRODUCTION ................................................................................................................................... 6 1.1 ASSIGNMENT BACKGROUND .............................................................................................................. 6 1.2 ASSIGNMENT GOALS AND OBJECTIVES ............................................................................................ 6 1.3 STRUCTURE OF THE ASSESSMENT REPORT ...................................................................................... 7 2 OVERVIEW OF ROAD NETWORK AND INSTITUTIONAL STRUCTURE.................... 8 2.1 IMPORTANCE OF ROAD NETWORK FOR THE STATE .......................................................................... 8 2.2 ROAD NETWORK OVERVIEW .............................................................................................................. 8 2.3 PROGRESS IN ROAD CONNECTIVITY ............................................................................................... 10 2.4 INSTITUTIONAL OVERVIEW .............................................................................................................. 11 3 CURRENT ROAD SECTOR FINANCING ................................................................................... 13 3.1 OVERVIEW ......................................................................................................................................... 13 3.2 EXISTING ROAD SECTOR FINANCING ............................................................................................. 13 3.3 ALLOCATION AND EXPENDITURE FOR THE ROAD SECTOR ............................................................ 14 3.4 ALLOCATION & EXPENDITURE ON NH, SH AND RURAL ROADS ................................................... 15 3.5 ALLOCATION AND EXPENDITURE BY TYPE OF WORKS ................................................................... 17 3.6 EXPENDITURE ON ROADS : BY CATEGORY OF ROAD NETWORK ..................................................... 20 3.7 SOURCES OF FUNDS ......................................................................................................................... 22 3.8 KEY ISSUES ....................................................................................................................................... 25 4 ASSESSMENT OF ROAD USER CHARGES AND TAXES................................................... 27 4.1 OVERVIEW ......................................................................................................................................... 27 4.2 TYPES AND OBJECTIVES OF EXISTING ROAD USER CHARGES ..................................................... 27 4.3 CLASSIFICATION OF ROAD USER CHARGES ................................................................................... 29 4.4 THE TOTAL ROAD USER CHARGES COLLECTION ........................................................................... 30 4.5 CONTRIBUTION TO ROAD USER CHARGES BY EACH VEHICLE TYPE .............................................. 31 4.6 ANALYSIS OF THE ROAD USER CHARGE REGIME .......................................................................... 33 4.7 ROAD USER CHARGES PAID BY NON ROAD USERS ...................................................................... 35 4.8 ROAD USER CHARGES RETURNED TO THE SECTOR ...................................................................... 36 4.9 CORRELATION BETWEEN ROAD USER CHARGES AND ROAD EXPENDITURE ................................... 37 4.10 KEY FINDINGS .................................................................................................................................. 39 5 FUTURE FUND REQUIREMENTS ................................................................................................ 41 5.1 NEED FOR FINANCE .......................................................................................................................... 41 5.2 MAINTENANCE REQUIREMENTS ....................................................................................................... 42 5.3 CONSTRUCTION /U PGRADATION REQUIREMENTS OF SH/MDR S ................................................. 45 5.4 CONSTRUCTION /U PGRADATION OF RURAL ROADS : ..................................................................... 47 5.5 ADMINISTRATIVE EXPENDITURE REQUIREMENTS .......................................................................... 48 5.6 OVERALL FUNDING REQUIREMENTS FOR CONSTRUCTION /U PGRADATION AND MAINTENANCE OF SH/MDR S & RURAL ROADS : ....................................................................................................................... 49 6 POTENTIAL SOURCES OF FUNDS ............................................................................................. 51 6.1 PROJECTED AVAILABILITY OF FUNDS FROM EXISTING SOURCES ................................................. 51 6.2 ROAD USER CHARGES AS A POTENTIAL SOURCE OF FUNDS ........................................................ 52 6.3 POLICY FRAMEWORKS TO PROMOTE ROAD SECTOR DEVELOPMENT ............................................ 54 7 GAP ANALYSIS ................................................................................................................................... 56 7.1 PROJECTED FUNDING GAP FROM EXISTING SOURCES .................................................................. 56 7.2 PROJECTED FUNDING GAP FROM FUNDING THROUGH ROAD USER CHARGES ............................ 56 7.3 COMBINATION OF ROAD USER CHARGES AND EXISTING SOURCES ............................................ 57 7.4 KEY ISSUES ....................................................................................................................................... 58 Himachal Pradesh Road Sector Finance Study - Final Assessment Report 8 KEY ISSUES AND WAY FORWARD ........................................................................................... 59 8.1 LOW CURRENT EMPHASIS ON STATE HIGHWAY NETWORK AND NEEDS ......................................... 59 8.2 DEDICATED AND DIRECTED FUNDING FOR SPECIFIC REQUIREMENTS ........................................... 59 8.3 HUGE FUNDING GAP ........................................................................................................................ 59 8.4 LACK OF SUSTAINABLE SOURCE OF FUNDING ................................................................................. 59 8.5 LIMITED FLEXIBILITY OF ALLOCATION FOR THE ROAD SECTOR ..................................................... 60 8.6 NEED FOR ALTERNATIVE FINANCING SOURCES .............................................................................. 61 8.7 NEED FOR ALTERNATIVE MODELS FOR DEVELOPMENT AND FINANCING OF THE NETWORK - PPP S 61 8.8 WAY FORWARD ................................................................................................................................. 61 ANNEXURE A: LIST OF PEOPLE MET .............................................................................................. 63 ANNEXURE B: OVERALL STATE FINANCIAL RESOURCES .................................................. 64 ANNEXURE C: FUEL CONSUMPTION .............................................................................................. 65 ANNEXURE D: RATES OF TAXES ON VEHICLES ........................................................................ 66 3 Himachal Pradesh Road Sector Finance Study - Final Assessment Report List of Exhibits Exhibit 1: Category-wise Road Network in HP as on November 2006 (in kms.) .................... 8 Exhibit 2: Total Vehicle Population (Registered Vehicles) .............................................................. 10 Exhibit 3: Status of Connectivity ............................................................................................................. 10 Exhibit 4: Total Fund Allocations & Actual Expenditure (Rs. Crores) ........................................ 14 Exhibit 5: Overall Utilization of Funds (Expenditure as a %age of Total Allocation) ........... 15 Exhibit 6: Allocation of funds for NH, SH and Rural Roads for various years ......................... 15 Exhibit 7: Actual Expenditure on NH, SH and Rural Roads for the past 5-years .................. 16 Exhibit 8: Percent Utilization of Funds by Category of Roads ...................................................... 16 Exhibit 9: Allocation of Funds by Type of Works (in Rs. Crores) ................................................. 18 Exhibit 10: Actual Expenditure on Roads by type of works (in Rs. Crores) ............................ 18 Exhibit 11: Maintenance Expenditure by Type of Maintenance ................................................... 19 Exhibit 12: Expenditure on Rural Roads ............................................................................................... 20 Exhibit 13: Expenditure on State Highways ........................................................................................ 21 Exhibit 14: Expenditure on National Highways .................................................................................. 22 Exhibit 15: Sources of Funds (in Rs. Crores) ...................................................................................... 23 Exhibit 16: Break up of Consolidated Funds of the state (Rs.Crore) ......................................... 23 Exhibit 17: Sources of resource generation & their objectives .................................................... 23 Exhibit 18: Sources of Funds- trends for the past
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