Highway fund hits opposition

The use of petrol taxes as a funding source for the Ministry of Transport’s proposed national road maintainance fund continues to stir controversy, even though the ministry’s latest proposal does not call for additional taxes for the next five years.

While the estimated annual need for road maintenance totals VND5.1 trillion (US$261.5 million) for highways and VND6 trillion ($307.7 million) for local roads, current funding sources meet just half of the demand for highways and even less for local roads, according to Minister of Transport Ho Nghia Dung.

The latest ministry proposal includes two options which would aim to mobilise financial resources to better manage and maintain road systems nationwide.

The first option would propose the immediate establishment of the fund at central and provincial levels. The funding for the first five to ten years would be sourced from the State budget, tolls and current petrol taxes.

After ten years, which would see the eradication of all road toll stations, the fund would be sustained by higher petrol prices and vehicle registration fees.

Toll stations would be eliminated to reduce traffic jams, eliminate corruption and cut administrative costs, said Nguyen Van Quyen, deputy head of the Directorate for Roads of Viet Nam.

The collection of additional petrol taxes would offset VND200 billion ($10 million) in costs related to the operation of road toll stations, said Quyen.

The second option would eliminate petrol taxes as a source of funds for road maintenance, but the ministry would delay establishment of the fund for at least five more years.

Dung said that the ministry continued to receive public comments on the fund proposal and that the ministry was committed to an appropriate roadmap to ensure the proper functioning of the fund without negative social impacts.

The ministry initially began circulating its draft decree on the road maintenance fund back in April for ministry and industry comments.

The first draft proposed new petrol taxes, vehicle registration fees, and levies on high fuel-consuming vehicles, but the proposal of a new fuel tax of VND1,000 ($0.05) per litre of petrol and VND800 per litre of diesel fuel was met with fierce opposition.

“With taxes and fees already accounting for as much as 30-35 per cent of petrol prices in Viet Nam, adding road maintenance fees, then environmental fees and resources fee, etc., a litre of petrol would carry too many taxes and fees,” said economist Ngo Tri Long.

“A vehicle in Viet Nam is already burdened with various fees that haven’t been clearly justified,” said Dr Pham Xuan Mai from the HCM City University of Technology. “Besides, few high-quality roads have been built and many others are in bad condition, causing breakdowns for vehicles.”

Hoang Duc Hau from the Viet Nam Bridge and Road Association also opposed the road maintenance fund proposal, calling it unfeasible for remote and mountainous areas.

Either of the latest options proposed by the ministry would cost the State about VND1.1 trillion ($51.3 million) in buying up toll collection rights at six privately-operated road toll stations, admitted Quyen, noting that 29 road toll stations on highways and another 26 on other roads would be slated for closure.

It would cost the State another VND100 billion ($5 million) to repay the debts of investors in toll stations, he added, and the jobs of nearly 2,900 toll booth employees would be lost. — VNS

Tags: National Highway funds, Vietnam Infrastructure