Do we need potholes in our toll gateways?

To start with, it would be vital for the government to implement a law for strong enforceability. Next, the revenue projection methodology should be standardised. The Government could shortlist/appoint a panel of companies that will carry out traffic estimation and outline revenue projection parameters. The use of ETC systems at all tolls across the country should be encouraged. A standard specification should be set out for developing ETC systems by different vendors across the country. In certain states such as Illinois in the US, about 80% of drivers use the Open Road Tolling programme which allows barrier-free travel at toll plazas by the use of E-Z Pass ETC system.

To deal with the interoperability issue, smart cards/tags/On Board Units (OBUs) should be made portable across ETC systems and toll operators. In Ireland, the interoperability issue is managed by a central clearing house i.e. IEA (Information Exchange Agency). Every six hours, the vehicle data related to billing of customers is sent by all toll operators to the IEA and vice-versa. In addition, the Government should make it affordable for the motorists to use cashless technologies by providing incentives and making the process convenient and user-friendly. India can take a leaf out of Croatia which has reduced discrepancies between different vehicle classes by having each class of vehicle pay a toll of around 1.5 times the toll paid by the previous class.

In Brazil, a public private partnership company was formed with responsibility for nationwide implementation of ETC and collection of toll charges. The system enables the identification and collection of vehicles/users on the occasions they use the tolls, and subsequently passes the charge to the concessionaires. For a country that prides itself as the leader of the Information Technology revolution, implementing the above enhancements is surely not beyond its capabilities. Additionally, road authorities should devise a policy to keep an annual check on toll operator performance. Parameters for evaluation can include expected vs. project revenues, quantitative measure of lane availability and measure of road conditions. Finally, to make projects more profitable, the government could take a leaf out of the power sector and follow the return on equity model which would ensure a fixed return for the investors.

Why is Shadow Tolling a Better option?

An alternative to enhance road usage is through the use of shadow tolling. In shadow tolling there is an arrangement between the government and the concessionaires under which the toll for all the vehicles passing through the road is paid by the government. The government in turn raises revenues by imposing higher road taxes, vehicle registration charges, etc. on the citizens as a means to equate the toll payments being made. Charging cess on the fuel is another way of doing this. This will eliminate the need for drivers to pay tolls directly, thus avoiding toll collection costs.

In the current scenario, the government lengthens the concession period whenever it finds the actual traffic to be less than the projected traffic. This affects the situation drastically as roads remain under-utilised even during that extended period.

Shadow tolling would notably reinforce smooth flow of traffic on a toll road. Consequently, more motorists would use the roads because of the elimination of explicit toll. It would also eradicate blockages on the road and result in a smoother traffic flow. Moreover, it would also bring down the operational cost of the concessionaires as no toll booths would be required, and only electronic scrutiny would be adequate.

Further, toll collections globally are marred by the presence of mafia. A study by India Infrastructure magazine shows that an average of 20% of toll collections around the world is gobbled up by the mafia. The application of shadow tolls would make the toll collection system impermeable to such risks.

Thus shadow tolling structure would optimise road usage, thereby eliminating loss of revenue from the government’s point of view, while at the same time lessening the cost of concessionaire. Another benefit would be that toll plazas would witness smooth flow of traffic, without blockages. It is an option which merits serious consideration, instead of taking the normal approach of reducing toll charges or increasing the concession period. This has already been tested in countries such as UK, Finland and Spain.

The path ahead

It is important that multiple stakeholders play an active role to complement the actions taken by the Government authorities. The toll operators would need to be aggressive in the implementation of the ETC systems. They should all comply with mutually accepted business rules and technology. At the same time, the operator should keep a check on internal and IT controls for minimising the revenue leakages. Project owners should strengthen internal IT controls, operate boom barriers and record the registration numbers of defaulters. Toll operators should formulate a system to record and regularly inspect toll revenues (reported vs. actual) and examine the tolling operations. They should also offer the Fleet owners (e.g. transport companies/truckers) an incentivised single tolling account and multiple affiliated sub accounts. This would help the companies to manage their tolling costs and track their fleet on a regular basis. Motorists should be made aware of legal actions in case of non–payments of toll.

Neville Dumasia

Executive Director & Head

Risk & Compliance Services

KPMG India.