The Ministry of Roads and Urban Development has started the process of establishing Transportation Development Fund with an initial capital of 190 trillion rials ($1.5 billion) to finance infrastructure projects in the sector.
During a meeting held early this week, the Cabinet approved the outline for the launch of the fund and allocated the capital, entrusting the Roads Ministry with the task of implementing all related measures, Mehr News Agency reported.
The fund will be utilized to provide incentives in national and foreign currencies to investors in transportation projects and to guarantee the repayment of investments. It will also facilitate knowledge-based companies' investment in the transportation sector.
Reportedly, the fund will be governed by a board of trustees comprising representatives from the ministries of roads and economy, along with the head of Plan and Budget Organization.
The establishment of the fund was first proposed in September 2015 and the parliament approved a bill in this regard in July 2016. However, it took until the present time to become operational.
The Roads Ministry was then allowed to set up the fund with an initial investment of 10 trillion rials ($82.6 million) out of its own resources and 190 trillion rials ($1.5 billion) from the state budget.
Transportation Development Fund is set to assist the payment of government dues toward the maintenance of transportation infrastructure, payment of subsidized loan for road renovation projects, give letters of guarantee to investors and issue debts and bonds to help finance transportation projects.
Critics’ Stance
While independent observers have welcomed the prospect of establishing the fund, many note that the initiative should not marginalize the private sector by increasing the state’s share in national development plans.
Industry observers have often called for promoting self-sustaining public transportation compared with the overtly and poorly managed state-run public transportation.
Abbas Akhoundi, the former roads minister who initially proposed the fund’s establishment, had often said that the fund will make it clear how much capital is at the disposal of the government and what priorities should be set.
Akhoundi believed that the importance of asset management is often neglected in Iran’s financial system and the government gains very little out of its considerable assets.
"Fuel, road and car taxes are the three main sources of revenues for development projects in western countries. Such a taxation system is not seen in Iran,” he added.
Stressing that Tehran Municipality’s vehicles taxes and duties are three times more than that of Roads Ministry, the former minister said, "Vehicle duties go to the municipality but the fact is that cars do not only ply 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.”
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.
He also suggested that one of the future initiatives could be to raise the share of road toll by 20% by 2025.
The problem is not limited to roadways, as railroads too are mostly built and managed by state-owned companies. However, in recent years, a few non-government trains have been operating on specific routes, especially to the holy city of Mashhad that is visited by millions of pilgrims around the year.
In Italy, the ratio of unsubsidized rail transportation to subsidized transportation is 75% to 25%. Experts believe that in the long run, there is no way but to improve self-sustaining public transportation.
