The Centre is planning to push the new toll-operate-transfer (TOT) model in the roads sector, buoyed by indications of interest from sovereign funds such as the Abu Dhabi Investment Authority and the Qatar Investment Authority, as well as Canadian Pension Plan INvestment Board.
If the pipeline of the 100-odd projects lined up under the TOT model can be successfully handed out to investors, the move would offer an avenue for monetisation of completed stretches of public-funded national highways that are up to two-years old, thereby helping mobilise additional resources for constructing of new highway sections.
Alongside the TOT option, where interest has been shown by the Abu Dhabi Investment Authority, Qatar Investment Authority and Canadian pension funds, the government-owned National Highways Authority of India (NHAI) is also exploring the possibility of raising funds through infrastructure investment trusts, officials indicated.
A major feature of private funding of roads is the collection of toll. In India, toll rates are calculated taking into account the base toll rate and the wholesale price index and are indexed to the projected costs of sections in the case of high cost structures.
Toll revenue numbers from across the country point to an over two-fold increase in collections over the last five years, with road users increasingly coming to terms with paying tolls on highways (chart). This is even as the private participation in the roads sector witnessed a severe liquidity crunch in the years 2012-13, 2013-14 and 2014-15, which resulted not just limited or no participation in the new projects awarded on the default BOT-toll format, but also delays in completion of ongoing projects.
The TOT push comes at a time when the overall outlook for tolling in India has improved, with Crisil Research pegging overall toll collection stretches to increase 1.5 times over next four years. According to the agency, the total stretch of highways under toll collection model for NHAI and key states is expected to increase 1.5 times from around 15,190 km in 2014-15 to around 22,200 km by 2018-19 and the total number of toll collection projects are projected to increase from around 250 (in 2014-15) to 360-365 in 2018-19. Of these, NHAI toll collection stretches are pegged to increase 1.4 times over next four years while toll collection on state highway stretches are expected to increase 1.5 times over next four years, according to Crisil.
NHAI had initiated the process of awarding projects on tolling towards the end of 2009-10 and as of 2014-15, according to Crisil estimates, around 6,990 km of national highways constructed under EPC and BOT Annuity are under tolling. This is expected to increase 1.4 times over the next four years and touch 10,300-10,500 km by 2018-19, primarily driven by a number of to-be awarded projects to be implemented on EPC/Cash contract basis. The total number of toll collection projects are expected to increase from around 102-104 currently, to 128-132 by 2018-19 (assuming an average length of 80 km for NHAI toll collection project), according to Crisil. Several hurdles, however, plague toll collection in India, including some factors that are intrinsically linked to the consumer behaviour of road users
in the country.
Problems associated with toll collections in India:
Transition from EPC to BOT: Most BOT project operators are companies that have evolved from EPC contractors into BOT concessionaires by leveraging their experience in constructing mega road projects. However, these companies had either no knowledge or very basic knowledge of tolling when they entered the tolling business, Ministry of Road Transport officials indicated. There is progressive realisation tolling is a very technical and complex activity and many varied factors contribute towards its success.
Unwillingness to pay toll: Users treat roads as a public good where the service should be provided free by the government.
Support from local authorities: The concept of BOT projects is not understood by the lower levels of administration with whom the concessionaires have to deal with on a daily basis.
Pilferage: According to a rough assessment, toll pilferage on ill managed plazas can be as high as 25 per cent. Even a momentary failure of toll IT system can result in considerable toll pilferages.
Detours: With wide-spread development of roads, taking a toll detour has become a standard practice by most road users. In a large number of concession agreements, there are no safeguards like check plazas. Therefore, to avoid loss of toll collections, choosing the correct location for the plaza becomes critical.
Political interference: This generally commences from protests against land acquisition and finally culminates in obstruction of tolling activities. Explicit clauses for addressing the issue of disruption of tolling activities needs to be included in the agreements. The ‘Force Majeure’ clause in contracts currently, does not provide adequate safeguards due to the lengthy time stipulations. Toll plazas are usually the target of political agitation in the near vicinity culminating in impacting toll operations.
Unauthorised exemptions: A large percentage of exemptions consists of road users who have to be necessarily exempted in order to ensure smooth and unhindered tolling operations. These road users have the potential to create problems. Tavon Young Womens Jersey