Why UP, Bihar, Odisha are driving ahead in toll collection

With companies largely dependent on road transport to move goods, toll collection by the National Highways Authority of India has also been growing at a steady clip over the last five years.

Tolling data show that three economically backwards States — Bihar, Odisha and Uttar Pradesh — have recorded the highest growth in toll revenue in this period.

Where do States stand?

The toll collection in Bihar and Uttar Pradesh recorded annualised growth of 48 and 50 per cent over the last five years with Odisha’s growth rate, not too far behind, at 36 per cent. The national average during the same period stands at 25 per cent.

There was a marginal decline in growth rate in FY 16, when compared to FY 15. Due to slowdown in industrial activity and poor monsoon affecting agri output, all-India growth in toll collection slipped to 20 per cent in FY 16. But these States continued to record more than 25 per cent growth in FY16 as well.

If absolute numbers are considered, economically developed States such as Maharashtra, Tamil Nadu and Gujarat contribute more to the NHAI coffers. But growth rates in these States were lower than the national average over the last five years, due to the higher base effect.

Growth drivers

So why are the economically backward States recording higher growth in toll revenue?

Shiva Rajaraman, Chief Executive of Infrastructure Debt fund, L&T Infra Finance, says, “Five years back the perception to pay for tolls was not well accepted in some regions. But, now, users are willing to pay to travel on quality roads even if they have to pay the commensurate toll price”.

The transition of many projects from construction to tolling stages in Uttar Pradesh, Bihar, Karnataka and Odisha between April-October 2015 could also have led to buoyancy in toll collections.

Higher usage of larger vehicles could be another factor aiding toll collection, say experts. “Nowadays, there is increasing replacement of multi-axle vehicle to transport goods which was earlier carried by few smaller vehicles. The differential charges for the vehicle types is expected to affect revenue,” says Rajaraman.

But the link between road construction in a period and the growth in toll collection appears tenuous. Annualised addition of highway road length in Bihar (3.3 per cent) and Uttar Pradesh (2.1 per cent) was quite weak between 2012 and 2016, when toll revenue grew at a brisk rate.

Similarly, the Andhra-Telangana and Maharashtra regions which managed to add road lengths at a rate of 15 per cent a year during the same period, saw only about 20 per cent annualised toll revenue growth.

Rather than increase in road length, higher economic activity can be a better driver for toll collections.

“Toll revenue is driven mainly by three factors — industry, agriculture, services/tourism. For an industrial region, movement of raw material and location of other production centres plays a major role in determining traffic. In case of the agriculture sector, localised movement of goods is a key determinant of traffic. For services sectors like tourism, a high percentage of tolling happens through passenger car movements,” says Rajaraman

A strong growth rate in Bihar both from industrial and service sector and a consistent growth rate in service sector in Uttar Pradesh over the past five years could therefore have aided toll revenues.

Chintan Lakhani, an analyst from India Ratings, says, “Around 35-40 per cent of the total traffic consists of passenger cars, while 60- 65 per cent is accounted for by commercial traffic. In terms of revenue composition, a mere 13 per cent of the revenue is accounted for by passenger cars.” So increase in commercial traffic is key to driving toll revenue growth.

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