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9 PPP Projects to be affected by Gujarat toll exemption policy – ICRA

Indian Toll Plaza

Gujarat toll exemption policy for passenger vehicles and state transport buses will effect nine toll road projects awarded through public private partnership (PPP).

Beginning August 15, 2016, Government of Gujarat (GoG) exempted the car/jeep/van category and state transport buses from toll on state highway. Because of this, there will be 9 PPP (public private partnership) projects which will be affected. The government intends to compensate revenue loss owing to toll exemption through monthly reimbursements for exempted vehicles.

The nine concerned projects are promoted as follows: three by L&T, two by IL&FS Transportation Networks Limited (ITNL), two by Welspun Enterprises and one each by Ranjit Buildcon Limited and M.S. Khurana Engineering Limited. Before 15th Aug, on both ITNL projects toll was being levied on two-wheelers as well. On the other 7 projects, toll was being levied on cars along and commercial vehicles.

Maharashtra toll booth

In order to keep a check on the compensation amount, concessionaires have been directed to set up exclusive lanes for cars, jeeps and vans and count vehicles using automatic vehicle counters (AVC). Historical data will be used to establish a formula to make necessary adjustments for exempted traffic, local users, traffic availing return journey and monthly passes.

State transport buses will be issued zero-value coupons to be produced by concessionaires to claim compensation. The AVC count derived for private vehicles, together with coupons for state transport buses will be used to decide upon compensation. Monthly bill for reimbursements is to be submitted by 5th of the month. GoG will reimburse by 20th of the month.

Shubham Jain, Vice-President, ICRA says actual traffic on most stretches is at around 60-65 percent of initial estimates. Projects on revenue share payable to Gujarat State Road Development Corporation Limited have sought deferment owing to weak toll collections. Toll exemption will be an additional cash flow burden affecting debt-servicing capability further. Timely and adequate reimbursements from State Government body are critical from debt-servicing perspective.

Gujarat car toll tax

The toll free initiative could result in increased usage through increased frequency of use and shifting traffic which was earlier re-routing through alternate routes to avoid toll payment. Government specifies in case of unreasonable rise in exempted traffic, it will restrict itself to the compensation considering reasonable growth rate of traffic.

Total revenue for FY2016 is estimated to be Rs.5.01 billion for eight of the nine projects. Assuming 6 percent growth in toll collections every year, total revenue during concession is estimated at Rs 137.47 billion.

Toll exemption is likely to result in disputes as quantum of compensation isn’t likely to be agreeable to all parties as seen in Maharashtra. Currently, private sector and lender participation is low for new infrastructure projects. Toll exemption could further dent confidence of both private participants and lenders.

About the author

Sagar Patel

Sagar Patel

A first drive in a manual rickety old van was enough to pave the road forward for Sagar Patel. When not driving or riding, his dexterity shifts gear to voice passion through words via reviews, and news, all the while, closely monitoring updates from the auto industry.

Email - sagar@rushlane.com

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