Making a hash of it
Letter of the Week: Get real
Top Stories

One for the road

It might be possible to redesign toll collection to reduce transaction costs.

Published:July 5, 2014 12:02 am
Those found not paying the toll tax will be penalised, civic officials said. (Source: Express archive) Economic costs associated with inefficient toll collection are even more worrying. (Source: Express photo)

By: Rohit K. Singh

Imagine travelling on high-quality national highways without having to stop every 60 or 70 kilometres at the toll plaza, without waiting in long, often chaotic, queues. Some might ask, but then how will our ambitious highway expansion plan be funded? It sounds counter-intuitive, but it might just be possible to do away with the toll plaza menace in its current form.

India has the world’s second largest road network, with 4.8 million km of roads. National highways comprise only about 98,200 km, or 2 per cent, of this but carry 40 per cent of the total traffic. Every year, about 8,000 km of national highway gets widened, strengthened or newly constructed, mostly through government-funded and public-private partnership modes of delivery. While construction has its own challenges, toll collection is increasingly witnessing conflicts, vandalism, law and order problems. Incidents in Maharashtra, Haryana and western UP are cases in point. The horrifying CCTV grab of a toll collection agent being shot by an enraged motorist is still fresh in our memory.

User charges are collected to recover capital investment on highways and to fund their operation and maintenance. It supplements infrastructure financing and reduces the pressure on the government’s budgetary allocations. It facilitates the expansion of the national highway network, crucial to fuelling inclusive economic growth. Interactions with stakeholders reveal that road users are willing to pay toll if they are provided adequate service levels, namely, reasonable riding quality and safety.

However, road users invariably complain about delays and harassment at toll plazas. Economic costs associated with inefficient toll collection are even more worrying. A study by IIM Calcutta and the Transport Corporation of India in 2012 concluded that “even though transit time had improved due to the new national highways, repeated number of halts at toll booths have humongous costs… the cost of delay on account of the commercial traffic being held up at toll plazas is of the order of a whopping Rs 27,000 crore per annum”. Add to this the loss of individual economic productivity due to delays.

One solution to this mess is a quick rollout of the electronic toll collection (ETC) system across the 280-odd plazas currently operational across India. However, in addition to the costs and complexities stemming from a multiplicity of operators along various stretches and the prerequisite of a central clearing house for seamless integration across the terrain, there are major enforcement issues. For example, how does one handle a vehicle with no electronic tag blocking a fast tag (ETC) lane — penalise with a higher toll or an offence under the Motor Vehicles Act? In faraway places, such situations might lead to conflicts.

What we need is a paradigm shift in the way we collect user charges for highways. The total toll collected on national highways in 2013-14  is estimated to be around Rs 13,000 crore. This includes toll collected on BOT roads by PPP concessionaires, and by the National Highways Authority of India on public-funded stretches and bridges. A March 2014 Crisil study covering over 100 national highway projects estimates that commercial traffic accounts for over 75 per cent of total toll revenues.

However, a suitable mechanism could be developed to collect the toll upfront from the truck unions or operators. Reportedly, the All India Motor Transport Congress may consider paying Rs 32,000 and Rs 16,000 annually for national permit and interstate vehicles, respectively, in lieu of toll. Similarly, Rs 15,000 and Rs 7,500 can be charged annually from light commercial vehicles, vans and buses for national and interstate permits. Also, from new passenger vehicles like cars and SUVs, a 1 per cent charge could be levied upfront on the purchase price as a lifetime toll fee. Back of the envelope calculations reveal that such a charge is likely to result in gross revenues that match the current levels of toll collection. Removal of the toll plazas is expected to result in large-scale economic benefits, as well as reduced fuel consumption and, consequently, lower levels of pollution. This is clearly a win-win proposition for both the government, which will be ensured ease of collection, and vehicle owners, who will be assured hassle-free passage on national highways.

However, an important issue would be the compensation mechanism for PPP BOT (toll) concessions already awarded. There are about 200-odd projects currently operational across the country and an appropriate settlement formulation would have to be developed. It is not rocket science. There is empirical and projected traffic data available with the NHAI, lenders and concessionaires. A multi-stakeholder group, comprising PPP operators, lenders and financial institutions, government and NHAI representatives, independent accountants and even the representatives of the CAG and CVC, and chaired by an eminent economist, could be assigned the task of quickly coming up with such a formulation. If PPP concessionaires insist on compensations based on actual traffic, “shadow tolling” could be resorted to. A robust third-party mechanism, preferably automated, for vehicle classification and counting will be needed for this.

Since freight volumes and the number of vehicles are growing faster than road length, it is time to explore non-intrusive ways to collect user charges so that inefficiencies in the toll collection mechanism do not take an undue toll on our economy. Collecting user charges upfront, on a lump sum basis, from commercial operators and passenger car owners is one option.

The writer is joint secretary to the government of India, ministry of road transport and highways

Do you like this story