The growth in toll charges for National Highway users will be lower next year because the Wholesale Price Index (WPI) is hovering at 1.9 per cent this year, lower than the four per cent in FY2018-19, according to India Ratings.
Every year, toll charges for national highways are calculated based on the WPI. A large chunk of highway projects have the formula of three per cent plus 40 per cent of WPI, some are directly linked to WPI, while some projects are assured of a fixed growth rate in toll projects.
The WPI was at 3.9 per cent in FY2017-2018, 4 per cent in FY2018-2019 and is expected to hover at a lower level of around 1.9 per cent in FY2019-20. This will lower growth rate of toll charges for users in fiscal 2021, Vishal Kotecha, Associate Director, India Ratings and Research, Fitch Group, said in a concall on Monday.
Slowdown effect
Moreover, the slowdown in economic growth is going to impact the toll collection revenue for users, Kotecha said. Traffic on toll roads is expected to grow at 2-2.5 per cent as traffic mirrors economic growth, said Kotecha.
As a result, lower WPI coupled with economic slowdown is expected to hit the toll revenue of companies that build and operate national highways. “Toll revenues are expected to grow in the range of four-five per cent in FY2019-20 against 8-9 per cent in FY19,” estimates India Ratings.