What the Centre takes on a litre

Central excise on petrol and diesel is four separate levies stacked together. The Petroleum Planning and Analysis Cell's Ready Reckoner lays them out as of 1 October 2025: a small basic excise duty, a special additional excise duty that does most of the revenue work, the Road and Infrastructure Cess, and an Agriculture Infrastructure and Development Cess. On 27 March 2026, with crude prices spiking during the Strait of Hormuz crisis, the Centre cut the special additional duty by ₹10 a litre — from ₹13 to ₹3 on petrol and from ₹10 to nil on diesel — to hold pump prices down. Nothing else moved.

October 2025 from PPAC's Ready Reckoner (Table 8.6); "now" reflects the 27 March 2026 cut to the special additional duty, which press reports say was still in force at the mid-September 2026 review. Unblended petrol carries a further ₹2 basic duty. State VAT comes on top: in Delhi, about ₹15.40 a litre on petrol and ₹12.83 on diesel at October 2025 prices.

The road cess has been cut hard before. It began as ₹1 a litre in 1998–99, was formalised by the Central Road Fund Act of 2000, became the Road and Infrastructure Cess at ₹8 a litre in the 2018 Budget, and peaked at ₹18 a litre in May 2020, when the Centre used it to capture the windfall from collapsing crude prices. The excise cuts of November 2021 and May 2022 came out of it, bringing it to ₹5 on petrol and ₹2 on diesel, where it has stayed. The March 2026 cut came from somewhere else, which is why the cess is now a much larger share of a much smaller excise bill.

Where the road cess goes

By law the cess feeds the Central Road and Infrastructure Fund. Under the original Act, half of the diesel cess went to rural roads, and the rest of the diesel cess plus all of the petrol cess was split between national highways, state roads and railway bridges and safety works; a 2018 amendment widened the fund to "infrastructure" generally, including railways, ports and energy. The cess was budgeted to raise ₹45,780 crore in 2025–26 and ₹46,930 crore in 2026–27. That sounds large, but the road transport ministry's budget for 2026–27 is ₹3,09,875 crore, 60% of it for the National Highways Authority of India, so the cess covers only about 15% of central road spending. The rest comes from general tax revenue and from monetising highways already built.

Even that 15% does not reliably reach the fund. The Comptroller and Auditor General has flagged every year since 2010–11 that cess money is not fully transferred to the funds it is levied for; of ₹1,24,099 crore in cesses not transferred by March 2018, ₹72,726 crore was road cess collected since 1998–99. The road cess is earmarked in law and only loosely in practice — which matters for what happens when its base starts to shrink.

What ₹46,930 crore builds

Highway costs in India vary tenfold depending on what is being built, so the cess is best measured against several yardsticks. The broadest is the government's own pipeline: 1,191 national highway projects covering 25,917 km were under construction at a combined cost of ₹7.15 lakh crore, according to a reply to Parliament — about ₹27.6 crore a kilometre. At that rate the road cess budgeted for 2026–27 pays for roughly 1,700 km a year, or about 4.7 km a day. The road transport ministry built 10,660 km of national highway in 2024–25, so the cess covers about one kilometre in six — the same one-sixth that the budget arithmetic gives.

One year's cess is the ₹46,930 crore budgeted for 2026–27; kilometres are this blog's division, rounded. Costs are project or sanctioned costs as reported and mix civil, land and pre-construction items differently, so the rows are yardsticks, not like-for-like estimates.

The spread matters as much as the average. The Comptroller and Auditor General found in 2023 that Bharatmala Phase I, approved in 2017 at ₹15.37 crore a kilometre for 34,800 km, had been sanctioned at ₹32.17 crore a kilometre for 26,316 km — more than double per kilometre, largely because of richer specifications and higher pre-construction costs. On those numbers a 100-km four-lane road at the national average costs about three weeks of road cess; a 100-km access-controlled expressway closer to eight weeks; and the 29-km elevated Dwarka Expressway, which the auditor costed at ₹250.77 crore a kilometre, about two months. The Delhi–Mumbai Expressway alone, at about ₹98,000 crore, is two years of road cess.

What an electric vehicle doesn't pay

An electric vehicle draws on the same roads and pays no fuel tax at all: no road cess, no other central excise, no state VAT on fuel. The table below estimates what a typical petrol two-wheeler, petrol car and diesel bus pays each year, which is what their electric replacements avoid.

Per vehicle per year. Excise is all central excise including the road cess; VAT is Delhi's. This blog's estimates at current excise rates and October 2025 Delhi VAT. Assumptions: two-wheeler 10,000 km a year at 50 km/l (ICCT's mileage assumption; real-world economy assumed); car 11,560 km a year at 15 km/l (UrbanEmissions survey mileage; economy assumed); bus 60,000 km a year at 3.5 km/l (both assumed, illustrative).

Applied to the electric vehicles sold in 2025–26 — 14,01,663 two-wheelers, 1,99,952 cars and 5,039 buses, according to Vahan registration data — that comes to about ₹235 crore a year of road cess and about ₹585 crore of central excise not collected. Electric three-wheelers are left out because most e-rickshaws replace cycle rickshaws, not fuel-burning vehicles. Against a ₹45,780 crore cess, the new cohort costs the road fund about half of one per cent a year. Each year's sales add another slice, and the electric fleet on Vahan is already around 7–8 million vehicles, many of them e-rickshaws.

Two things make the gap bigger than the road cess alone. First, the cess is the small piece. The Centre collected ₹2,71,529 crore of excise from the petroleum sector in 2024–25 and the states ₹3,02,059 crore in sales tax and VAT, according to PPAC. A November 2022 CEEW study estimated that fully electrifying cars and two-wheelers would cut central fuel excise by 28% and state fuel VAT by 20%, and that electricity duty on charging would recover only about 1% of the loss. States are the more exposed: fuel VAT is about a fifth of their own tax revenue, as this blog has shown separately. Second, EVs also escape most other vehicle taxes. They pay 5% GST against 18% or 40% for petrol and diesel cars after September 2025's GST changes, and most large states waive road tax and registration fees for them — Delhi until March 2030 for cars up to ₹30 lakh, Maharashtra until March 2030, Tamil Nadu until December 2027, Telangana until December 2026, Uttar Pradesh until October 2027. Karnataka went the other way in April 2026, reinstating lifetime road tax of 5–10% on electric cars while keeping two-wheelers exempt, the first large state to reverse.

The March 2026 cut had a side effect worth noticing: by slashing central excise, it nearly halved what a petrol two-wheeler or car pays the Centre each year — ₹2,380 now against ₹4,380 before for a two-wheeler — and so nearly halved the central tax an EV avoids. The road cess, untouched, is now the most durable part of what an EV is not paying.

The EV gap in kilometres of highway

Put the two together and the size of the gap becomes concrete. The ₹235 crore a year of road cess that last year's electric two-wheelers, cars and buses will not pay would build about 8.5 km of national highway at the average cost of projects now under construction. Each new year's sales add a similar slice, so five years of cohorts at today's pace would cost the road fund about 40 km of highway a year — a rounding error against 10,000 km of annual construction.

The picture changes once electrification starts to cut into fuel volumes. India used about 60 billion litres of petrol and 115 billion litres of diesel in 2025–26, by PPAC's consumption figures. Scaled to the budgeted cess, every 1% of petrol volume that moves to electricity removes about ₹266 crore of road cess a year, and every 1% of diesel about ₹203 crore. If a tenth of petrol and a twentieth of diesel volume were electrified, the cess would lose about ₹3,680 crore a year, or 8% — some 130 km of highway. At 30% of petrol and 15% of diesel the loss is about ₹11,000 crore, nearly a quarter of the cess and around 400 km of highway a year. These are illustrations of scale, not forecasts.

The other way to see it is as a price per kilometre — the incremental charge an electric vehicle would pay to match what its petrol or diesel twin pays in road cess.

Road cess of ₹5 a litre of petrol and ₹2 a litre of diesel divided by the assumed fuel economy (₹ per 100 km is also paise per km); the truck's 4 km/l is an assumption, the others as in the table above. This is the road cess only; matching all central excise would more than double the petrol figures and multiply the diesel ones by nearly four.

Those are small sums per trip — ₹33 for a 100-km car journey, around two crossings' worth at the annual-pass rate — but a charge collected only on national highways would recover only part of the gap. National highways are about 2% of India's road length and, by the road ministry's long-standing estimate, carry about 40% of its traffic. A highway-only EV charge at these rates would therefore raise well under half of the cess that EVs avoid, and nothing at all from the two-wheelers that make up most electric vehicles sold but pay no national highway tolls.

Tolls: the road charge EVs already pay — mostly

There is one road charge in India that does not care what is under the bonnet. On a tolled national highway an electric car pays the same user fee as a petrol car, and an electric bus or truck the same as a diesel one, because the fee is set by vehicle class, not fuel. That charge is now bigger than the road cess. User-fee collections on national highways and expressways more than doubled in four years, from ₹33,929 crore in 2021–22 to ₹70,278 crore in 2025–26, as the number of fee plazas rose from 733 to 1,209, according to figures the road transport minister gave Parliament in July 2026.

Toll series from the minister's Rajya Sabha reply of July 2026 as reported; earlier years: ₹55,882 crore in 2023–24 and ₹61,408 crore in 2024–25. The 2025–26 total includes ₹1,795 crore from the FASTag annual pass. The revision formula is from the National Highways Fee Rules, 2008, as summarised by NIIF.

So on the roads the Centre builds and tolls, electric cars and heavy EVs already pay their way roughly as diesel and petrol vehicles do. The gaps are elsewhere. Two-wheelers, nearly nine in ten of the electric two-wheelers, cars and buses sold in 2025–26, pay no national highway tolls whatever they run on, so an electric scooter pays neither the road charge nor the fuel tax. Tolls cover only plaza sections of a 1,46,572 km national highway network, and none of the state and rural roads that the diesel cess was meant to fund. The toll money is also not free fiscal space: much of it repays the people who built the road. Of ₹61,408 crore collected in 2024–25, about ₹28,824 crore came from plazas NHAI runs on publicly funded highways; most of the rest went to private concessionaires and investment trusts that bought the right to toll, and NHAI still carried about ₹2.4 lakh crore of debt in 2025. And states have begun waiving tolls on their own roads: since August 2025 Maharashtra has exempted electric cars and buses on the Atal Setu, the Mumbai–Pune Expressway and the Samruddhi Mahamarg, with goods carriers still paying.

The flat-fee trend points the same way. The FASTag annual pass, launched on 15 August 2025 at ₹3,000 and raised to ₹3,075 from April 2026, gives a private car 200 plaza crossings for a fixed price — about ₹15 a crossing, well below most single-trip fees. It is popular, with more than one crore passes issued, but it moves the toll away from charging for use, which is what a road charge for EVs would need.

Satellite tolling: written into the rules, then put on hold

The tool that could turn tolls into a true per-kilometre charge exists on paper. On 10 September 2024 the road transport ministry amended the National Highways Fee Rules to allow collection through a Global Navigation Satellite System: a vehicle fitted with an on-board unit would pay by distance travelled, with the first 20 km in each direction each day free for vehicles other than national-permit trucks, and a vehicle entering a satellite lane without a working unit would pay double. Pilot studies had been run on the Bengaluru–Mysuru stretch of NH-275 and the Panipat–Hisar stretch of NH-709, and in 2025 the minister said the system would cover the country by the end of 2026.

It will not. In July 2026 the government said its Apex Committee and a High-Level Empowered Committee of industry and academic experts had recommended "further deliberations" on satellite tolling because of security, privacy, data-breach and operational concerns, and that it would instead roll out multi-lane free-flow tolling using FASTag, number-plate cameras and AI analytics. The first such plaza opened at Choryasi on the Surat–Bharuch section of NH-48 on 1 May 2026; the ministry's stated aim is to convert plazas in phases, and amendments in March 2026 let it send e-notices and penalties for unpaid tolls caught on camera. Free-flow tolling removes the barrier but not the plaza: it still charges for crossing a point, not for distance. Only access-controlled expressways, where tolls are charged by entry and exit, charge for distance today.

How other countries are charging EVs for roads

Countries further along the transition have already moved, and their choices show the options.

The Australian case is a warning about who is allowed to charge. In India, taxes on vehicles suitable for use on roads are a state subject under Entry 57 of the State List, so states can charge EVs directly through road tax, as Karnataka has begun to; a per-kilometre charge for road use on national highways sits more naturally with the Centre, which already collects tolls. India had written the tool a distance charge needs into its highway rules, but, as above, satellite tolling is now on hold and the free-flow system replacing plazas still charges per crossing. No official proposal links either system to an EV road charge.

What would fix this

• The Finance Ministry should publish road-cess collections and actual transfers to the Central Road and Infrastructure Fund side by side every year, and transfer the full amount — the step CAG has asked for since 2010–11 — so the cess either funds roads in full or is honestly treated as general revenue.
• The Budget's statement of revenue foregone should include an annual estimate of fuel excise and road cess not collected from electric vehicles, by segment, so the size of the gap is measured by the government before it becomes large, rather than by think tanks after.
• The Ministry of Road Transport and Highways should pilot a per-kilometre road charge for heavy electric vehicles — buses and trucks — on access-controlled expressways, which already toll by entry and exit, set at roughly the road cess a diesel vehicle pays per kilometre (about 57 paise for a bus at 3.5 km a litre), while light EVs stay exempt during the adoption phase. Publishing the data-retention and access rules its own committees asked about would let satellite tolling be reconsidered for the wider network.
• States should replace open-ended EV road-tax waivers with published phase-downs tied to EV share of new registrations, so owners and manufacturers know when concessions end, rather than facing an abrupt reversal like Karnataka's.
• The road transport ministry should publish national highway toll collections by fuel type each year, which linking FASTag accounts to Vahan registration records already makes possible, so that what electric vehicles pay in tolls can be set against what they do not pay in fuel tax.

These are proposals from this blog, not recommendations any agency has adopted.

Sources and caveats

About this article: Researched, written and edited by Umashankar Triplicane Dwarakanathan, with AI research assistance; every figure is meant to trace to the primary source cited. See the Editorial Policy for how sourcing, AI use and corrections work.