Toll collection practices in India

Basics of Toll Collection

• Legal Basis:
  • National Highways Act, 1956 → empowers GoI to levy fees (Section 7) and make rules (Section 9).
  • Current framework: National Highways Fee (Determination of Rates and Collection) Rules, 2008.
• Models of Collection:
  • Publicly funded highways → toll collected by GoI/NHAI.
  • Build Operate Transfer (BoT) → concessionaire collects till investment recovered + concession period.
  • Toll-Operate-Transfer (ToT) / InvIT models → private players operate & collect toll.
• Fee Structure:
  • Base rates fixed in 2008.
  • Escalation: +3% annually + 40% of WPI increase.
  • Not linked to actual cost recovery or quality of service.
• Revenue Trend:
  • ₹1,046 crore (2005–06) → ₹55,000 crore (2023–24).
  • Of this, ~₹25,000 crore goes to Consolidated Fund of India, balance to concessionaires.
  • Toll is now seen as a perpetual revenue stream, not just cost-recovery.

Relevance : GS 2(Governance)

Problems in Current Tolling Regime

• Perpetual Tolling:
  • Even after capital costs are recovered, tolling continues indefinitely (due to 2008 amendment).
  • Creates “double taxation” feeling since users also pay high road/cess on fuel.
• Transparency Issues:
  • No independent authority to evaluate if toll rates are justified.
  • Annual hikes are automatic, not linked to road quality, maintenance, or service delivery.
• Equity Concerns:
  • Toll is a regressive tax: affects poorer daily commuters disproportionately.
  • No concessions during road expansion/construction phases, despite reduced usability.
• Operational Inefficiencies:
  • FASTag rollout improved things, but queues persist due to:
    • faulty scanners,
    • insufficient lanes,
    • inadequate top-up/recharge facilities on site.
• Trust Deficit:
  • Users perceive toll as a permanent government rent rather than a genuine cost-recovery mechanism.

Key PAC Recommendations

• End Perpetual Tolling:
  • Toll should end once project cost + O&M costs are recovered.
  • Any extension must be justified and approved by a new independent regulator.
• Independent Regulatory Authority:
  • Oversee toll determination, collection, and escalation.
  • Ensure fair pricing, transparency, and accountability.
• Reimburse Users During Construction:
  • If widening/repair work disrupts traffic, commuters should get reduced or refunded toll.
• Reform Escalation Formula:
  • Move beyond flat +3% + partial WPI indexation.
  • Link hikes to actual O&M costs, road quality benchmarks, and vehicle operating costs.
• Improve FASTag Functionality:
  • On-location services at plazas for recharge/replacement.
  • Address scanner and connectivity issues to reduce congestion.

Global Comparisons

• Developed Economies:
  • US, EU → tolls are typically project-specific, end after debt recovery, or replaced by road-use taxation.
  • Transparent public audits of toll revenues.
• China:
  • Heavily tolled network; clear sunset clauses after debt recovery, though extension common in practice.
• Brazil & Mexico:
  • Mixed concession models but linked to service guarantees (lane availability, safety, emergency services).

India’s perpetual tolling model is more revenue-driven than service-driven.

Science & Economics of Tolling

• Economic Rationale:
  • User-pays principle → those who benefit should pay.
  • Efficient in theory but inequitable in practice if poorly regulated.
• Issues with Perpetual Tolling:
  • Becomes a hidden tax beyond cost recovery.
  • Erodes public trust → leads to evasion, protests, and resistance.
• Technology Solutions:
  • GPS-based tolling (already piloted in EU, Singapore): pay-per-km, avoids bottlenecks, fairer distribution.
  • Dynamic pricing based on congestion and road quality.

Way Forward: Suggested Reforms

• Policy Reforms:
  • Roll back perpetual tolling amendment.
  • Legally mandate sunset clauses post cost-recovery.
  • Mandate value-for-money audits of highways.
• Institutional Reform:
  • Independent toll regulator under NHAI/NITI Aayog.
  • Public reporting of toll revenue, O&M expenditure, debt repayment.
• Technological Reform:
  • GPS-based tolling to replace physical plazas (reduces leakage & congestion).
  • Full FASTag integration with seamless top-up, auto-deductions, digital complaint redressal.
• Equity Safeguards:
  • Discounts for frequent commuters, public transport, and local residents.
  • Temporary toll suspension or reduction during construction phases.