When the fares take a toll

When the fares take a toll

With the government unable to subsidise hi-tech road development, it has relied on toll as the only means to keep the six-lane airport road  financially viable. It’s now the public-private partnership era.

There have been protests all over the country over toll payment on national highways, the latest one at Kempegowda International Airport (KIA). People in general don’t want to pay toll or at most would like to pay a low toll.

But the economic systems that are in place in the world, and in India, broadly capitalist, have now veered towards the philosophy that you have to pay for facilities you enjoy and also to keep the project financially viable. The government will never have all the money and not as much as private investors do, who can’t be allowed to make a killing.

So the idea has taken root that every project has to finance itself to remain viable - which usually means people have to pay and be charged a fee for public projects like road development. It is in this broader change in world economy that works on the principle, pay and only then get a service, that India too has gone in for the toll. But this apart, there are several India-specific factors why the highway toll was introduced in the country. This may make clear to the public why they need to pay for services. The concept of “free” service is dead.

A planning commission study in 2009 explains how toll came about in India. ­­­­­­­­­­­­­­Levy and collection of fee for use of the redeveloped and augmented sections of national highways (NH) was introduced in 1997 under the provisions of the National Highways Act, 1956. Over time, some anomalies came to light and it was, therefore, decided to review the tolling framework.

The need for a comprehensive toll policy had also assumed greater significance in the context of an expanded National Highway Development Programme (NHDP) which envisaged bulk of the investment from Public Private Partnerships (PPPs), where toll revenues would constitute the mainstay of financial viability. It was only after the NHDP launch in 2000 that collection of toll fee became big. NHDP was launched with the idea of upgrading highways across the country to usher in development and investment on a national scale apart from the revenues it would bring.

Prior to NHDP, there was toll, but only on bridges constructed on NHs and a few sections of highways as stand-alone projects. In 1997, specifically, the government took a decision that all 4-laned highways would be tolled and the first major NH stretch brought under toll from March 30, 1998, was the Kotputli-Amer section of NH-8. Five years back, over 4,100 km of NHs were being tolled and revenue generated was on an average Rs 30 lakh per km.

The estimation then was that total accrual from the Golden Quadrilateral alone would be around Rs 1500 crore per annum.

The toll being levied in Bangalore and all other metros has its roots in the NH Act 1956 and the National Highways Fee (Determination of Rates and Collection) Rules, 2008, as amended. Currently there are 209 fee plazas in NHs with NHAI. As per the present policy in case of  six-laning projects where 4-lane facilities are already available, tolling is launched immediately even before completion of highways.

The 1956 Act empowers the Central government to declare any highway to be a national highway; to acquire any land required for the building, maintenance, management or operation of a national highway; to collect and retain fees for services or benefits rendered by Central government keeping in view the expenditure involved in building, maintenance, management and operation of the NH, interest on the capital invested, reasonable return, the volume of traffic and the period of such agreement; and is empowered to make rules for carrying out the purposes of this Act.

Because of anomalies in the older toll system, it was decided to review the toll policy prior to 2000. Senior officials from the planning commission working under the chairmanship of PM, debated and discussed the new toll plans for nearly three years between 2005 and 2008, and finally notified the new national toll policy on December 5, 2008.

The vital part of the 2008 toll policy was the view on revision of toll. The government decided it might be appropriate that toll rates are indexed to wholesale price index and revision in toll rates is allowed automatically on the basis of a predetermined formula.

Three major recommendations on rate revision were made by the panel: (i) The toll rates may be revised annually both for public-funded and BOT projects from April 1 each year; (ii) The basic toll rates, as recommended for the year 2006-07 may be increased by three per cent every year, without compounding. (iii) To neutralise impact of variable cost of operation and maintenance, 40 per cent of annual increase in WPI shall be provided with respect to preceding adjusted rate without considering the impact of fixed annual increase of three per cent.

The 1956 NH Act and The NH (Determination of Rates and Collection) Rules 2008 thus explain the rationale behind toll - as a self-financing mechanism that alone will ensure financial viability of the project. So, the toll on Bellary Road is being collected in line with these policies. What is irking taxis, cabs, buses and the travelling public, however, is not the toll itself, but the extent of rise in the toll - cars under the old rates were paying Rs 30 for a round trip, while now, cars have to pay Rs 115 for a round trip - this is a massive 383 per cent rise in rates.

When Deccan Herald asked NHAI how this could be permitted and on what basis it was done, the official said: “The toll hike is as per the contractual agreement between NHAI and Navayuga company. It is in line with the agreement.”

A company official also told this newspaper: “The hike is as per the contractual agreement.”
 In the case of Bellary Road, the project cost of the 3.7-km elevated expressway, which has helped commuters cover the 22-km stretch in 20 minutes, is said to have been calculated in the toll being charged now.

The expressway has cost Rs 220 crore. NHAI officials say to ensure transparency and to secure the best and most competitive bids for highway projects, toll rates are indexed to wholesale price index and revision in toll is allowed automatically on the basis of a predetermined formula. This revision can be undertaken annually and the basic toll can be increased by three per cent every year.

NHAI senior official A K Mathur has said that the construction of the elevator was in response to a public perception that the road to KIA was too congested. This was mentioned in a Public Interest Litigation (PIL) seeking remedy.

The High Court in response suggested to the State government to work out a solution, which turned out to be an elevated expressway, an idea suggested by NHAI too. “The NHAI planned to have a seamless, signal-free travel to the airport.

Once that was decided, we started work on the basis of the 2008 national toll policy under the NH (determination of rates and collection) 2008. The toll and revision are based on the 2008 Rules. We were not in favour of flyovers. We wanted the airport journey to be one straight drive, not up and down. But whatever has been done is as per NH policy.”

The 2008 rules permit annual revision of toll, a three per cent increase in basic rates, and thirdly, revision in accordance with wholesale price index prevailing at the time of revision. The present revision, NHAI says, is only one-time fee for one year as the cost of the elevated expressway had to be factored in and that the year after, toll would take into account the entire stretch from Hebbal to KIA, and not only the elevated expressway.

The other toll roads may follow suit and it is expected that the increase may be in the range of seven to eight per cent.

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