Assessment of
Road Funds in South Asia
Jean-Noel Guillossou,
Sr. Transport Economist,
Natalya Stankevich,
Operations Analyst
South Asia Sustainable Development Department,
Transport,
November 20, 2008
Team and Budget
USD 20,000 Thanks to Connie and Guang
Major Team:
 Analysis and report: Jean-Noel & Natalya
 Research and data collection:




Silva in Nepal
Zulfiqar in Pakistan
C. S. Balaramamurthi and R. K Jain, STCs, in
India
Objective of the study


Original: To assess the effectiveness and
impact of the RFs in SAR (i) on the level of
funding for maintenance and (ii) condition of
road networks which are maintained with RF
resources
Final: To assess the institutional and funding
arrangements of the existing RFs in the region
Road Funds covered by the study
At the national level:

India Central Road Fund (CRF)
established in 2000

Roads Board Nepal (RBN) in
2002

Pakistan Road Maintenance
Account (RMA) in 2003
At the state level in India:

Uttar Pradesh (UP) State Road
Fund in 1998

Madhya Pradesh (MP) Farmer’s
Road Fund in 2000

Kerala State Road Fund in 2002

Assam State Road Fund in 2003

Karnataka Chief Minister’s
Rural Road Development Fund
in 2004

Rajasthan State Road
Development Fund in 2004
Note: Bangladesh RF, Mizoram RF, and Sri Lanka Road Maintenance Trust
Fund (RMTF) were not covered by the study because they were not
operating and had no lessons to learn from.
Criteria of Assessment

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Mission and reason of creation of RFs
Legal framework
Purchaser and provider split
Good governance
Measurable outputs and performance
indicators
Fund flow mechanism
Funding allocation rules
Mission and reasons for creation of a RF
Main reason:
 To ensure adequate
and stable sources of
maintenance funding:
Nepal, Pakistan,
Assam, Karnataka, and
UP
 To finance
development of roads:
the rest of Indian RFs
In reality:
 Only RBN and Pakistan
RMA  routine
maintenance
 Others :



development of roads
major improvement works
consultancies
Legal Framework

Established through:




Legal Act: RB Nepal, India CRF, Kerala SRF and Rajasthan SRF
Secondary-level legislation: government order (Karnataka RF),
notifications (Pakistan RMA, MP RF and UP RF), and decision taken
by the State Cabinet (Assam RF)
Only RB Nepal, India CRF, and Pakistan RMA have Supplemental
Rules to clarify administrative mechanisms
Findings:



RBN Act and Rules are not fully implemented demonstrating that a
sound legal basis is not enough to make a RF successful
a RF (e.g., Pakistan RMA) can be successful without the expected
level of soundness of its legal basis, but this may be a short-term
success
Need of a more in depth-assessment if the respective legislations are
being properly implemented
Purchaser and provider split

Pakistan RMA: NHA as Purchaser and
Provider:



So far procedures and systems have helped to
increase transparency
Possible risk of conflict of interest if the legal
basis is not strengthened
Others: clear separation of the purchaser and
provider roles
Measurable outputs and performance indicators



No RF compares the program actually executed versus the
program planned for execution
Only RBN has a results framework in place, but comparison
is limited to disbursements versus funds allocated
DORs/RAs often use proxies (output, not outcome oriented)
for M&E purpose:



% of funding allocated to the road sector compared to the needs, or
km of roads to receive different types of maintenance
No country is found in SAR with a long term vision of where
it would like the road network to be measured by an outcome
indicator (e.g.:


maintain annually at least 84% of the state paved network in
acceptable overall pavement condition (cracking, rutting, roughness);
maintain 87% of the state highway network in overall preferred
condition)
Governance and Accountability

India CRF, Karnataka RF and MP RF:


Others:
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financing instruments without any specific governance
mechanisms: no management board, no involvement of road
users, no transparency in decision making and very limited
disclosed information
limited additional governance mechanisms beyond those
typically used in government institutions
RBN is the only RF where accountability and
transparency in resource allocation is a legal requirement
and is enhanced in relation to road agencies spending
RBN’s resources
Board autonomy


3 out of 9 RFs under study – India CRF, Rajasthan and MP
RFs – do not have management boards
None of the existing Boards are autonomous:



dominated by public sector representatives (in the Pakistan case, all
Board members are from the public sector)
chaired by top level public officials
Lack of autonomy in RBN is related to governance issues at
the country level:

Nepal is second after Afghanistan in SAR in terms of lower degree of
government effectiveness as measured by the quality of public
services, the quality of the civil service and the degree of its
independence from political pressures, the quality of policy
formulation and implementation, and the credibility of the
government's commitment to such policies
Auditing



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Financial audit required for all RFs except Karnataka RF
Technical audit required for Pakistan RMA and Assam RF
No requirements for internal controls are specified in the
legal frameworks of RFs
Information on audits is limited and does not allow to
determine if these mechanisms are employed and help
improve the performance of RFs
Financial and technical audits of Pakistan RMA are always
delayed limiting their usefulness in helping improve
performance of both RMA and NHA
Financial audits of RBN are carried out on an annual basis
and their findings are discussed and taken into consideration
Transparency



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Only RBN’s legal documents (Act & Rules)
available on on its website
Only the Legal Act of RBN and Pakistan RMA
Rules require disclosure of information other than
legal documents
Very limited information is available on Indian RFs
and no annual reports are made widely available to
the public
It may change with implementation of India RTI Act
Involvement of road users

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Limited and not active involvement of road users
1-2 representatives on Boards from a truck or other
transportation-related association
Not as active and influential as public sector representatives
Have limited understanding of their role and limited capacity
to provide meaningful inputs in a rather technical domain
RBN and Pakistan RMA have recently started conducting
Road User Surveys (RUS) and stakeholder consultations
In India, NHAI and some PWDs have started conducting
RUS with the help of the World Bank, but they are not linked
to RFs yet
Fund Flow Mechanism
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All RFs, except the Pakistan RMA, receive their
resources transferred through national/state
treasuries
Most RFs, except Karnataka, UP RFs and RBN’s
revenues from fuel levies, are non-lapsable and can
carry unspent resources over to the next fiscal year
Revenues collected from road tolls are the only
revenues always deposited directly to RFs’ accounts
Fuel levies are always transferred to RFs through
treasuries
Source of Revenues

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Diverse sources of funding (fuel levies, tolls,
vehicle registration charges, police fines, sales tax
on agr. produce, motor vehicle tax, etc.)
Fuel levy is a major source of revenue for RBN and
most of Indian RFs
Only Pakistan RMA is not financed from this
source
Often some sources of revenue specified in the
RF’s legal framework are not used (e.g., Assam RF
has 11 sources, but only gov. grants used)
Sources of Revenues
Pakistan RMA
Roads Board Nepal
Others, 1%
Police fines, 10%
Gov grant, 20%
Incom e from
w eight stations,
3%
Vehicle
registration fees,
39%
Fuel levy, 51%
Tolls, 10%
Tolls, 66%
Pakistan RMA: Maintenance funding
14,000
12,000
Rs. Million
10,000
8,000
6,000
4,000
2,000
2001
2002
2003
Gov grant
2004
2005
Tolls
Total
2006
2007
Allocation rules

Allocation rules by type of road or network:

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In the legal frameworks of most of the RFs
(except Assam, Rajasthan and UP RFs)
Actual allocation seems to comply with the rules
in most of the cases
Allocation rules by type of works:

In the legal frameworks of RBN, RMA and
Karnataka RF
Lessons Learned

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Improved governance at the country (or state)
level is one of the key success factors for
effective performance of a RF
Fuel levies are never deposited directly to the
RF account
RFs cannot be the only institutions held
accountable for the management of roads
Recommendations (part 1)
1.
2.
3.
4.
The establishment of a RF is an appropriate answer
when there is a budget system failure. However, even if
there is no budget system failure, RF can be a good
instrument to improve governance (financial
management, transparency )
Assessment of governance should be conducted at the
country level before promoting the establishment of a RF
Priority should be given to achieving good governance
of the RF and its Board
A political economy analysis of road maintenance is a
prerequisite before considering a financing mechanism
such as a RF
Recommendations (part 2)
5.
6.
7.
8.
Where the road agency has good capacity for road
management, the RF can concentrate on management of
resources and focus on its role as financial institution
The creation of a RF should be considered in parallel
with development or strengthening of the road
management capacity of an executing road agency
An accountability mechanism should be developed to
ensure that all revenues collected from fuel charges and
designated as RF resources in accordance with the
relevant legal framework are transferred in full from the
central treasury to the RF account
The designation of the road institution in charge of
monitoring the quality of the road network needs to be
clarified
Recommendations (part 3)
9.
10.
11.
12.
Governments should continue providing budgetary
support to road maintenance
User fees should not be used as revenues of a
development Road Fund
Allocation rules by type of road/network should be
defined in the Legal Act
Decisions on the allocation of resources by type of
work for local road networks should be decentralized
and not made by the RF