Tolling challenges in India – The business end of BOT Projects

The process of awarding PPP highway projects on BOT models has come to a near standstill. Today, there are hardly any bidders for highway based projects on BOT models. Potential and existing concessionaires are finding it difficult to recover their investments with reasonable rates of return. The success of any business is not calculated from the equity invested but is dictated by the return on the investments. Herein lies the main reason why the PPP model for highway development is on the verge of failure. Very few BOT projects have failed due to construction cost overruns; rather, many have landed in dire financial straits due to their anticipated toll collections falling way below the expected level.

Most BOT project operators are companies that have evolved from EPC contractors into BOT concessionaires just because of their experience in constructing mega road projects. However, these companies had either no knowledge or very basic knowledge of tolling when they entered the tolling business. Tolling operations were made into an extension of the finance department with a presumption that ?tolling is a simple activity of collecting the toll fee from road users and nothing more?. This conjecture was based on the tolling experiences of developed countries where resistance to pay toll is very low and toll collections are duly supported by statutory regulations. Quite a few BOT project concessionaires, even today, consider tolling as a secondary activity to construction.

The realisation that efficient toll collection will decide the success or failure of a project vis-?-vis capital investment is slowly being experienced now. Awareness is now dawning upon them that tolling is a very technical and complex activity and many varied factors contribute towards its success. A few challenges faced in the process include lack of required provisions in the concession agreements, ambiguous existing laws and lack of support from authorities & law enforcing agencies on forced toll gating by road users refusing to pay toll.

The tolling operation needs to be looked upon as a distinct and important aspect in a project?s success. With a large number of projects not meeting their financial targets, senior management personnel are now getting involved in toll operations. This has resulted in tolling operations becoming a separate and independent entity within the organisation. Special audit teams are being set up and audits by external agencies, both for tolling operations and IT systems, have become a part and parcel of the tolling operations.

To make tolling operations successful, many unique challenges need to be overcome. Certain restraining issues, hazards and impediments in tolling, typical to our country, are enumerated below:

? Unwillingness to pay toll: Road users feel this service should be provided free by the government as they are already paying taxes. They do not want to pay toll fees as they believe it will go into the pockets of private operators.

? Support from local authorities: The concept of BOT projects is not understood by the lower levels of administration with whom the concessionaires have to deal with on a daily basis. This results in lack of support of the local administration which is very critical for smooth tolling.

? Involvement of authorities in assisting toll collections: Authorities awarding BOT projects provide none to very limited support to the concessionaire in ensuring toll collections as per the concession agreements. Unlike some advanced countries, in India, toll road operators have no law to support them in realising the toll from the road user. Even lodging an FIR on this account becomes problematic as there are no clear instructions on the applicability of IPC clauses on forced toll gating.

? Negative impression: A negative impression of toll road operators exists in the minds of the public, authorities, police and the media that they are just minting money through these projects without any attention being paid to their investments and services being provided by them.

? Pilferage: According to a rough assessment, toll pilferage on ill managed plazas can be as high as 25%. Even a momentary failure of toll IT system can result in considerable toll pilferages.

? Detours: With wide-spread development of roads, taking a toll detour has become a standard practice by most road users. In a large number of concession agreements, there are no safeguards like check plazas. Thus, to avoid loss of toll collections, choosing the correct location for the plaza becomes critical.

? Exploitation by political parties: This generally commences from protests against land acquisition and finally culminates in obstruction of tolling activities. Explicit clauses for addressing the issue of disruption of tolling activities needs to be included in the agreements. The present, ?Force Majeure?, does not provide adequate safeguards due to the lengthy time stipulations.

? Unauthorised exemptions: A large percentage of exemptions consists of road users who have to be necessarily exempted in order to ensure smooth and unhindered tolling operations. These road users have the potential to create problems.

? Toll plaza; the symbol of the project: Toll plazas, due to any project related issues of construction, safety, accident, etc., are always the target of political agitation in the near vicinity culminating in impacting toll operations. Plaza managers with strong public management skills or PROs are required to address this problem.

? Coin management: A very small percentage of toll is collected electronically. Generally, availability of coins with the banks is a critical issue. Managing the change money, especially coins, becomes vital. Toll fees are being rounded off to the nearest ?5. However, at certain projects, it is still being rounded off to the nearest rupee. Ideally, to avoid coin management issues, toll fees should be rounded off to the nearest ?10. Concessionaires for new projects must bid for the same in the toll fee schedules.

Rigid concession agreements, once executed, are next to impossible to amend. Concessionaires can mitigate issues affecting them by focusing on the following actions:

? Tolling Operations? Staff: A good efficient staff is essential for the smooth functioning of the plaza. The staff should be polite and courteous but firm in its dealing with the public. One incident of incorrect handling of an important road user can result in the disruption of tolling activities for a prolonged period of time.

? Technology: The technology used for tolling systems should be reliable (very high mean time between failures), accurate (should capture all transactions with a high degree of vehicle classification accuracy), flexible (capable of giving reports in the desired format) and robust (against hardware and software tampering). This should be supported with adequate power backup and the required capacity of UPS and generators.

? Plaza Design: The plaza design should be able to cater to future expansions. The planners / designers must be optimistic in traffic calculations while working out the lane requirements. Long queues might result from unavailability of lane expansion avenues. Lanes should be designed for peak hour traffic. Variation in peak hour traffic is sometimes as high as 300%. Delayed users are a potential risk to the projects as they might create problems leading to adverse observations by the NHAI, IEs and local administration. These can sometimes lead to agitations or incidents of mass forced toll-gating, resulting in substantial toll revenue losses.

? Staggered Lanes: Due to land acquisition problems, toll plaza designs need to be reworked. Instead of in-line lanes, staggered lanes should be built.

? Traffic Surveys: Accurate traffic surveys are very important in correctly calculating the toll revenues. Rather than depending on third parties to collect data, in-house teams should be developed for collection of the data to ensure future accountability. Senior level executives should personally get involved in the traffic surveys. Latest technology like PATCC, video traffic counters and CCTVs should be used.

? Incident Management at toll plazas: Any untoward incident at a toll plaza will result invariably in the toll plaza staff being blamed. Use of CCTV and surveillance cameras can act as the biggest asset and witness in such cases. Good quality CCTV network and PTZ cameras with good zoom and night view facilities to record activities occurring in lanes and plaza areas will also prove useful in providing the correct picture of the incident. Good relations with local administration, police and media must be maintained as these may come handy during such situations.

? Plaza Location: Correct plaza location is of critical importance. No detours should be available to users to bypass the plaza as it will result in loss of revenue. Plazas should preferably be located in close proximity to choke points like bridges or railway crossings and closer to district boundaries to avoid local commuter issues.

? Plaza Operations: The following processes must be ensured proficiently at the Plazas:

? Throughput time of vehicles to be reduced to a minimum through training, technology and operational processes.

? Courteous and polite tolling staff. Behavioural training of staff at regular intervals should be organised.

? Due attention should be given to comments on social media, especially on the Facebook page of NHAI.

? Response to public grievances should be prompt and courteous. The road users? complaints given in writing must always be followed up with written feedback.

? Exemption management process should be transparent and highly audited.

? AVC accuracy should be very high to reduce load on the auditors.

? Auditing processes should be integrated in toll operation procedures. Regular offsite audits and third party audits should be conducted.

Tolling in India is at a nascent stage right now and poses a big challenge to toll road operators. This fledgling sector has a great future if tolling operations are handled properly. Profitable tolling operations will ensure success of projects and have the potential to revive this sector. The road of success or failure of a BOT project passes through its Toll Booths.

 

 

 

 

An army Colonel, Atul Parmar has vast experience in Toll operations and maintenance (O& M) along with knowledge of contemporary Tolling & HTMS processes. Before joining Soma- Isolux Corsan, he was the Project Head (O&M) for the Larsen & Toubro project for 6 laning of 83 km Vadodara-Bharuch section of NH-8 in Gujarat.