Report of action initiated by Sub-group III
on sources of sustainable finance

Sub-group III headed by Mrs. Sudha Pillai, Joint Secretary (Rural Roads) was constituted to identify sources of sustainable finance for rural roads. For this purpose discussions were held with NABARD who have suggested two financing options under which funds in the range of Rs. 23000-27000 crores will be raised over a period of four/five years with the help of 1 years tax saving bonds on which interest would be payable at 9%. These options will be discussed in detail by them in their presentation. Letters have also been issued out to Chairman, CBEC to examine the elasticity of cess on diesel and also to assess the possibility of waiving taxes on construction material like bitumen, steel and cement. Letters have also been written to some other financial institutions inviting their suggestions on ways of augmenting funds on rural connectivity. Meanwhile it may be mentioned that under Basic Minimum Services about Rs. 2000 crores and under EAS another Rs. 400 crores are spent on construction of rural roads. Further under Rural Infrastructure Development Fund on NABARD about Rs. 5020 crores worth proposals were sanctioned in five branches. However only 4% of the funds approved for rural roads have been sanctioned.