The NHAI Crisis Part 5: The Tolling and Revenue puzzle!
While tolling to pay for construction of roads is as old as Roman Empire (and possibly older in India), the concept of tolls is not very well developed. In this part, we explore the details of tolling. It is the most critical piece of puzzle and should be one of the first issue to be fixed.
 
Need for tolling
 
Ideally, developing roads is the responsibility of the government. Government collects taxes out of which it is supposed to fund the development of roads.
 
However, developing countries like India, have low tax collections constraining infrastructure development. Therefore, to tide over the lack of availability of resources, build-operate-transfer (BOT) type projects were conceptualised. Here the private player assumes the risks for recovering the costs and making a return for creating a road. To get the return, BOT contractors get a right to collect toll from users of their road.
 
In general, infrastructures such as railways, pipelines, power grids, water, broadcasting and broadband networks, by design, charge for the benefit they provide. This is the “user-pay” principle. Tolls are simply a mechanism to deploy that principle to roads. 
 
Tolls can be ONE of two things
 
At present the tolls are sold to public as a means to ensure a return on the road project investments. This principle of tolling, called toll for expected return, is consistent with BOT-type projects or for projects divested using toll-operate-transfer (TOT) projects. Here, toll is a specific, time-limited mechanism to provide return on a particular road project. In this case, the amount of toll depends upon the traffic, the cost of the project and promised return to the contractor. Once these criteria are met the tolls should STOP. The World Bank PPP Legal Resource Centre document, titled ‘Tolling Principles’, identifies three methods for determining total amount of toll-revenue-maximisation, welfare maximisation and operational and maintenance cost recovery. 
 
Alternative principle is, tolls as a pay-per-use tax for the population. In this case, the rate of tolling can be standardised across the country. The toll rates are lower, and they are applied in perpetuity. The toll collection goes to a central or state government kitty and from there it is allocated to fund new projects or pay off old projects. The new National Highways Authority of India (NHAI) contracting methods like BOT-Annuity, engineering, procurement and construction (EPC), hybrid annuity model (HAM) type models, are more suitable for this method of tolling. However, if we accept this principle of tolling then we must subsume into this, all other taxes like fuel surcharge, road tax, etc.
 
Indian toll system is unnecessarily complicated
 
There is lot of confusion as to principle of tolling at centre and state level. Across the country the principle of application is different. 
 
At the moment, the stated policy use the first principle of tolling i.e. toll for expected return, and tolls are used to recover investments in road projects.
 
However, if the tolls computed based on this principle is too high then there is political intervention and tolls are reduced arbitrarily. This was one reason why contractors are reluctant to bid for BOT projects, where toll collection is their responsibility. 
 
Conversely, governments, once they get used to the toll revenue are reluctant to close the revenue stream. Maharashtra, for example, started with first system at Mumbai toll plazas. The idea was to recover the costs of Mumbai infrastructure using the toll at a certain return. This implies that once the cost of the infrastructure was recovered the toll will cease. However, it was later moved to second system.
 
It is not clear why the toll is being levied at present. Therefore, there is no way to determine if we are being tolled at proper rate or less or more. 
 
The wide-spread anti-toll protest arise because of the change of the principle of tolling without informing the public. In effect, toll is being collected for project that has paid itself over. Further, the toll collected is not utilised to improve the quality of roads tolled. Hence the tolled road is ridden with potholes. Here people are forced to pay for a service that has not been provided.
 
We need absolute clarity on the principle of tolling at a national level. Indians must resign to the fact that tolls are not going to go away. What we can insist is the transparency in determining the level of tolls but more importantly in collection of tolls.
 
Transparency in Toll collection is a BIG issue
 
The lack of transparency with respect to toll collections relates to the levy of tolls, collection and deployment of the collected proceeds.
 
As mentioned earlier, we are constrained to admit that toll is here to stay. It is never going to go away. However, we should now ensure that the metrics used to decide the amount of toll is just and fair. So fairer norms and mechanisms need to be developed as to how levels of toll will be decided, when they will be revised etc. All other taxes including fuel surcharge, road taxes must be subsumed into the tolls. These decisions depend on transparency in collection of tolling.
 
A tolling contractor must be required to disclose all the financials at toll-booth level. The level of corruption means that absurd numbers are being reported by tolling contractors. As shared in a previous article, activist Sanjay Shirodkar found out that tolled traffic as reported by toll contractor has not increased over 10 years. This simply cannot be true.  Mr Shirodkar and Vivek Velankar found a discrepancy of about 50% in the number of average daily traffic on the Mumbai Pune Expressway reported by the contractor and Maharashtra State Road Development Corp (MSRDC). The contractor and MSRDC eagerly attribute it to VIPs and exempted vehicles. 
 
We need metrics of number and types of vehicles and tolls collected in real time.
 
The screens and information kiosks are already set up at certain tolling stations.
 
However, that information must be publicly available on the internet. 
 
Toll collection transparency issue can be completely solved by enforcing 100% electronic tolling. The cost benefit for creating the 100% fully electronic, open road tolling makes it a no-brainer. In fact, in this series we have repeatedly urged that 100% electronic open road tolling should be the first project to be undertaken by NHAI and all state tolling agencies.
 
The final aspect of transparency in tolling relates to deployment of proceeds. There needs to be a systemic, real time mechanism to understand as to how much tolls were collected and where these funds were applied. At present the government makes the citizens need to jump through various hoops to get this information. This mindset must change. This information must be available in real time and transparently. It requires that we evolve a government financial reporting standard. (It is a separate issue by itself which may be subject of a separate article). Suffice to say we need transparency in application of proceeds collected from tolls.
 
The 100% electronic open road tolling system
 
In this method, the toll is charged when the vehicle moves from under a gantry with electronic sensors. Every vehicle needs to have one sensor inside. The toll amount is deducted from your account in real time. Modern technology allows this to be implemented using number plate identification too. The benefit of this system is that vehicles do not have to stop or slow-down while toll is collected.  
 
The data on traffic and toll collection is tallied by computers and uploaded to the central server. In this technology it is possible to introduce variable pricing methods to help manage traffic better. Thus, when congestion on one road increases, the toll rates can increase based on program (and advanced information given to drivers on road signs). The drivers can be directed to alternate routes where tolls can be reduced to ease the congestions.
 
The system is integrated nationally and supplemented with satellites (which India already has). Just using the software and additional technology we will be able to create toll system that is flexible, fair and transparent.
 
In Sum
 
It is absolutely critical that first a logical, national level metrics are established on level of tolls to be collected. Second, NHAI and all state bodies must complete 100% electronic, open road tolling across the country on war-basis. Third, all the information should be available in public domain as to traffic data, tolls collected, toll deployed etc.
 
Transparency in tolling will solve 50% of NHAI problems. In out next and final article in this series we will detail how to solve other 50% of NHAI’s problems.
 
You may also want to read…
 
 
 
 
 
(Rahul Prakash Deodhar is a private investor and Advocate, Bombay High Court. He can be reached at [email protected], on twitter at @rahuldeodhar or at his website www.rahuldeodhar.com.)
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    COMMENTS

    kpushkar

    4 months ago

    Pune Bangalore road is bad to worst now . Not worth paying toll .. no improvement in last 9 years ...i wonder if the court is sleeping over it or too busy in mid night Afjal guru type priorities. May be they get it all free. So don't t care. The road beyond Kolhapur is fantastic . And toll us more reasonable

    Newme

    4 months ago

    Having lived in USA, I have noticed one thing. There Toll roads are an option for faster or shorter travel. At the same time, there exists an alternative free route. But in India, Toll roads are the only option at many stretches. This forced TINA Toll roads are human rights violation.

    REPLY

    Prasenjit Sarkar

    In Reply to Newme 4 months ago

    Agree absolutely and most tolls are just arbitrarily priced. Imagine paying Rupees 40 for a single journey by a commercial LMV on a 3-4 Kilometer stretch. This is not imaginary. It is there in Pune on the erstwhile NH4 and the toll contractor does not even provide a proper receipt.

    Haryana: 13% MLAs Have Criminal Cases, Average Asset of MLAs Jump to Rs18.29 Crore, says ADR
    As many as 13% of the newly elected members of legislative assembly (MLAs) in Haryana have declared criminal cases against them, while the average asset size of these MLAs have jumped over 40% to Rs18.29 crore, reveals a report. 
     
    According to an analysis carried out by Haryana Election Watch and Association for Democratic Reforms (ADR), out of the 90 MLAs analysed, 13% of the MLAs have declared criminal cases against themselves. "Four out of 31 MLAs from Congress, two out of 40 MLAs from Bharatiya Janata Party (BJP) one each from Jannayak Janta Party, Indian National Lok Dal (INLD), and Haryana Lokhit Party and three out of seven independent MLAs have declared criminal cases against themselves in their affidavits," the report says.
     
     
    Out of the 90 newly-elected MLAs, 84 or 93% are crorepatis, compared with 75 or 83% during Haryana 2014 assembly elections. At the same time, the average assets of these MLAs jumped to Rs18.29 crore in 2019, from Rs12.97 crore in 2014, the report says. MLAs from Jannayak Janta Party have the highest average assets of Rs25.26 crore, followed by Congress at Rs16.32 crore and BJP at Rs12.04 crore.
     
     
    But, in terms of assets, all these political parties are beaten by an independent MLA, Balraj Kundu from Mehem constituency in Rohtak district. He has declared an asset of over Rs141 crore and is followed by Kuldeep Bishnoi of Congress from Adampur constituency in Hisar district at more than Rs105 crore and Gopal Kanda of HLP at over Rs95 crore assets. Mr Kundu has also shown total income of Rs8.18 crore, including his own, his wife and dependent children while filing his income tax return (ITR).
     
     
    Balbir Singh of Congress, who won from Israna constituency in Panipat district has declared lowest assets of Rs40 lakh, the report shows.
     
    Gopal Kanda, who is emerging out as kingmaker in Haryana, has highest liabilities of over Rs78 crore, out of which liabilities of over Rs39 crore are disputed, as per his affidavit.
     
     
    Talking about education, as many as 62% of the MLAs are graduate or above degree, while 30% out of the total 90 MLAs have education qualifications between 5th to 12th pass. 
     
     
    Majority or 63% of the newly elected MLAs from Haryana are between 51 years to 70 years, while six MLAs are over 70 years. About 11%) MLAs have declared their age to be between 31 and 40 years while 19% MLAs have declared their age to be between 41 and 50 years.
     
     
    Out of the total 90 MLAs, 29 are re-elected again and have registered an average growth of Rs3.25 crore or 24% in their assets compared with previous election.
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    COMMENTS

    shadi katyal

    4 months ago

    It is a very educational data and gives educational background but what it fails to tell us the number of criminals and reason of being given tickets by each party.
    Whu has EWC gailed to check thids over all.

    NDA vote share down in assembly polls compared to LS polls
    Five months after the Lok Sabha victory, the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) has suffered a loss in its vote share in Haryana and Maharashtra.
     
    The major loss is in Haryana, where the party vote share has been drastically reduced by 22 per cent in comparison to the Lok Sabha polls. Held in April-May, the BJP's vote share was 58 percent and it won all the ten Lok Sabha seats in the state. However, the vote share has come down to 36.49 per cent in the Assembly elections, which though is three per cent more than the 2014 polls. 
     
    The BJP is, however, considering this as a victory. Prime Minister Narendra Modi during his address to the party workers on Thursday at the party headquarters mentioned about the three per cent increase in an effort to boost the morale of the workers. 
     
    In Maharashtra, the vote share in the Assembly elections has declined in comparison to the 2019 Lok Sabha polls. In the previous Assembly election in the state, the party had secured 47 lakh votes and 122 seats, and this time the number has come down to 41 lakh and 105 seats.
     
    The BJP and the Shiv Sena had fought the elections separately the last time but this time they fought together. 
     
    The BJP said that the party's strike rate this time was better. Being in the alliance, it meant that the party was fighting on a lesser number of seats than the last polls. 
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    User

    COMMENTS

    Suketu Shah

    4 months ago

    NOTA is the power of the voting public so that political parties are forced to select better candidates.However the public has to realise this and fast.

    shadi katyal

    4 months ago

    It seems to me that we see Modi and Amit shah only talking of election and nothing else as far the economy is concerned.
    Is this majority of BJP in both houses to change thed present constitution and other laws without any opposition and control media?
    Secularism ended and now we see the democracy on the operating table

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