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priced below import costs. Taxes on fuels varied sharply across countries: gasoline taxes ranged from 2 to 56 percent of its retail price, and averaged 33 percent over the 15 countries; taxes on diesel oil ranged from 0 to 55 percent of retail price (zero in one case), and averaged 22 percent. Gasoline-diesel tax differentials of 19 to 46 percent are found in 4 countries; 0 to 2 percent in 6 cases; and an average of 7 percent in the rest of the sample.

9. Three important points can be deduced from the fuel price and tax data. First, fuel taxes expressed as a proportion of their corresponding retail prices varied markedly among countries. Since these taxes were a major component of road user revenues, the observed differences in tax rates should account in part for the diverse cost recovery levels seen earlier across sample cases. Second, there is no doubt that in those countries with large tax differentials (e.g., Korea, Senegal, Uganda and YAR), gasoline taxation was being used primarily to generate fiscal resources. Third, a cross-subsidization from gasoline to diesei users was evident in several countries reviewed, varying only in degree as suggested by the differences in the gasoline-diesel tax margins.

10. Most road user charge systems have fallen short of the objzctive of relating levies to the costs that different types of vehicles are imposing upon the road network. Heavy vehicles in particular are reportedly not taxed appropriately to cover the eamage they inflict on the roads. Such a shortcoming is manifested through taxation policies on different types of fuel, import duties and licensing fees, and regulations concerning vehicle dimensions and axle-load limits. Relatively lower taxation of diesel oil, which results in heavy vehicles making insufficient contributions to the costs of developing and maintaining roads, was acknowledged in at least half of the sample; the Yemen Arab Republic is the worse case in point, with no taxation applied to diesel fuel. Indonesia is another extreme case wiith heavy vehicles contributing only 2 percent to road costs while accounting for nearly 80 percent of road traffic. In 7 countries heavy vehicles are trceated preferentially via lower charges or exemptions from custom duties or licensing fees.

11. The axle-load limit is one form of road transport regulation devised to control road damage that arises through overloading of vehicles. Regulations of this nature exist in most of the sample countries; however, they are often poorly enforced. Axle-load taxes were not found in any sample countries. Thus in instances where the axle-load limit is not effectively enforced, the lack of an axle-load tax manifests a discrimination in favor of heavy trucks and buses; and hence, a subsidization of their use of road services by light vehicles.

# B.3 Use of Pricing Covenants

12. Of the 22 projects reviewed, 13 have some form of covenant with implications for pricing/cost recovery. They include agreemetnts to increase fuel taxes or maintain the domestic prices of fuel at levels appropriate to enhance road user revenues (found in 2 cases); to conduct a road user study, or prepare an action plan for revising user charges, with the objective of relating charges to the costs that different types of vehicles are imposing on the road network (9); to cover a specified proportion of annual