Govt to introduce road maintenance tax on fuel

Passengers are already reeling from an increase in transport fares due to a recent fuel price hike

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The government has readied a new set of draft rules that will introduce a road maintenance tax on fuel.

The draft will now be vetted by the Law Ministry before being sent to the Cabinet Division for final approval.

According to the draft rules on the Road Maintenance Fund Board 2021, the government will collect Tk1 from the sale of each litre or cubic metre of fuel to cover road maintenance costs. The charge will apply for petrol, octane, diesel, compressed natural gas (CNG) and liquefied natural gas (LNG) used by all motor vehicles.

Furthermore, all road, bridge and ferry tolls collected by the Road Transport and Highways Division and 25% of tolls collected by the Bridge Division will also go towards road maintenance, as will all existing traffic fees, taxes and import duties for the registration and movement of various vehicles.

Transport experts fear that increases to fuel prices due to the road maintenance tax may lead to concurrent increases in fares on public transports, leading to suffering for commuters. Public transport users are already reeling from an increase in fares due to rising fuel prices late last year.  

The draft rules were published on the Road Transport and Highways Division website for a month till January 10 for public opinion. The government plans to implement the new rules by the end of the year.

“The draft rules will not be modified again unless we receive an outside opinion on a major issue. The draft will now be sent to the Law Ministry for vetting before being sent to the Cabinet for approval,” said Road Transport and Highways Division Secretary and Road Maintenance Fund Board Chairman Nazrul Islam.

“We are optimistic that we can form a fund from this year,” he added, mentioning that increases in public transport fares would be discussed with public transport owners if they demanded them.

How much would the government make?

The Finance Division allocated Tk2,687 crore to repair and maintain roads and highways in the 2020-2021 fiscal year. The government stands to make nearly double the amount from the road maintenance tax alone in a calendar year.

There are 4.78 million registered motor vehicles in the country, Bangladesh Road Transport Authority data shows.

According to the Ministry of Power, Energy and Mineral resources, motor vehicles in the country use about 135 million cubic metres of CNG and 5.2 million litres of petroleum fuel each day. In a calendar year, this amounts to Tk4,927.5 crore from the road maintenance tax on CNG and Tk189.8 crore from petroleum fuels.

As per the draft rules, the funds will be used to cover expenses such as salaries and allowances of the officers and employees of the board in addition to maintaining roads.

Pressure on passengers 

Transport expert and Bangladesh University of Engineering and Technology (Buet) Professor Hadiuzzaman said increases in public transport fares due to the road maintenance tax would place undue pressure on commuters.

“Public transport fares were hiked barely two months ago due to increases in global fuel prices. They will probably rise again due to Covid-related passenger capacity restrictions.  If the fares are increased because of road maintenance funds as well, there will be a lot of pressure on passengers,” he said.

During the Covid-19 general holiday and lockdown period in 2020, public transport operators operated at half capacity but with 60% higher fares. 

The Buet professor suggested collecting road maintenance funds primarily through tolls and taxes on other items.

“The government can initially put subsidies into the fund if needed,” he added. 

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