Trace the evolution of dedicated road financing in India from the Jayakar Committee (1927) to the Central Road Fund Act, 2000. Is fuel-cess earmarking sustainable as transport moves to electric vehicles?

India began setting aside fuel taxes for roads with the Indian Road Development Committee (Jayakar Committee), 1927–28 [1]. This model has lasted almost a century. The shift to electric vehicles now puts its revenue base at risk.

Evolution of dedicated road financing

• 1927–28, Jayakar Committee: called for a steady, dedicated source of money for roads [1][2].
• 1929, Central Road Fund (CRF): funded by an additional excise duty on petrol. Provinces received grants approved by the Governor General in Council, advised by a Standing Committee on Roads [3]. This was an early form of tied grants.
• 1931–88, fixed rate: 2 paise per litre of petrol, later 3.5 paise; diesel was not taxed. The rate stayed frozen until 1988, so its real value kept falling [2].
• 1988, parliamentary resolution: set aside at least 5% of the basic price of petrol and diesel, so the levy now rose with prices [2].
• 2000, CRF Act: put the cess on petrol and HSD into law. It funds National Highways and state roads [4].

Is fuel-cess earmarking sustainable in the EV era?

Strengths

• User pays: fuel use roughly follows road use. A levy set as a share of price gives steady money for maintenance [2].

Concerns

• Shrinking base: EVs use roads but pay no fuel cess.
• Leakage: the CAG found a short transfer of ₹48,130.71 crore of road cess to the CRF over 2010-11 to 2016-17 [5]. Earmarking works only if the money actually reaches the fund.
• Federal strain: under Article 270, cesses are kept out of the divisible pool shared with states [6]. Cesses and surcharges were about 10–15% of the Centre's gross tax revenue in 2011–20. They were estimated at 24% in 2020-21 [7], which shrinks the states' share.

Verdict: the model is sustainable only in the medium term, and only if it is reformed.

Way forward

• Transfer the full cess into the fund, as the CAG has urged [5].
• Phase in distance-based or vehicle-based road-user charges for EVs, and index them to costs, as the 1988 reform did.
• Cap cesses or share part of them with states to reduce Centre–State friction.

From Jayakar's petrol excise to the 2000 Act, India has followed one principle: road users pay for roads. That principle still holds. What must change is the tax base, from fuel to road use. That way road financing stays sustainable, fair to states and in line with SDG 9 on resilient infrastructure.