Rising crude oil prices could impact infra funding in FY23

With crude oil prices at eight-year high, concerns over funding of infrastructure projects especially in the roads and water segments have been rising. What worries analysts is that rising energy prices may force the government to reduce the roads and infrastructure cess (RIC) once again to limit the impact on the prices of crude derivatives such as petrol and diesel. If that happens, it will reduce the RIC collection for FY23, which will in turn affect the funding for road projects.

RIC collection has been a meaningful source of funding for infrastructure projects. According to an analysis by brokerage Nomura, the RIC collection was 28.4% of the gross budgetary support (GBS) given to the National Highways Authority of India (NHAI) in FY18. The proportion increased to 32% based on FY22 estimates and is expected to shoot up to 96.8% for FY23. This underscores the importance of RIC in the roads funding.