Roads Ministry to Establish Transportation Development Fund

EghtesadOnline: The Ministry of Roads and Urban Development plans to establish a transportation development fund by the end of the incumbent government’s tenure.

News ID: ۷۷۶۲۰۴

15 May 2017

“We need to find a way to finance infrastructural projects. It seems as if a spending race is underway at the moment. No one wants to reduce the government’s costs,” Roads Minister Abbas Akhoundi was also quoted as saying by Mehr News Agency.

Addressing a meeting of representatives of Iran Road Construction Association on Saturday, Akhoundi said the importance of asset management is often neglected in Iran’s financial system and the government gains very little out of its considerable assets.

He noted that fuel, road and car taxes are three main sources of revenues for development projects in western countries, Financial Tribune reported.

“Such a taxation system is not seen in Iran. The ministry proposed fuel tax as part of the budget bill of the fiscal March 2015-16, but it was not implemented due to concerns over a possible sharp rise in fuel prices,” he said.

Akhoundi said Tehran Municipality’s share in fuel is three times more than that of Roads and Urban Development Ministry, adding that the government paid the municipality 45 trillion rials (about $1.2 billion) last year whereas the municipality received 15 trillion rials ($400 million).

The minister said the launch of Transportation Development Fund will make it clear how much capital is at the disposal of the government and what priorities should be set.

“Vehicle excise duties go to the municipality but the fact is that cars do not only roll onto urban roads; they move along intercity roads as well. I believe there should be a centralized fund for duties, the revenues of which should go to investors and contractors,” he said.

Akhoundi also called for a bigger share of self-sustaining public transportation compared with state-run public transportation and said toll freeways account for about 2,000 kilometers out of 200,000 kilometers of Iranian roads, suggesting that the share of self-sustaining public transportation is insignificant.

“One of the future initiatives could be to raise the share of road toll by 20% in the next 10 years,” he said.

“For example, in Italy, the ratio of unsubsidized rail transportation to subsidized transportation is 75% to 25%. In the long run, there is no way but to improve self-sustaining public transportation,” he said.

The parliament approved the bill for the establishment of Transportation Development Fund in July 2016 to provide sustainable financial resources for expanding transportation infrastructure and attracting investments. Assisting the payment of government dues for maintenance of transportation infrastructure, payment of subsidized loan for road renovation projects, giving letters of guarantee to investors and issuing debts and bonds to help finance transportation projects are other activities designed to be carried out by the fund.

The Ministry of Roads and Urban Development was then allowed to set up the fund with an initial investment of 10 trillion rials ($266 million) out of its own resources and 190 trillion rials ($5.06 billion) from the state budget.

The fund is to be governed by a board of trustees comprising the roads minister, economy minister and the head of Budget and Planning Organization.