Any move to hike road toll will stoke inflation: NHAI

A proposal moved by the road transport and highways ministry in February to increase toll on all national highways by up to 20% has failed to find favour with the National Highways Authority of India (NHAI), the central agency under the ministry that builds highways across India.

A proposal moved by the road transport and highways ministry in February to increase toll on all national highways by up to 20% has failed to find favour with the National Highways Authority of India (NHAI), the central agency under the ministry that builds highways across India.

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Calling it "unjustified", RP Singh — who recently took over as NHAI chairman — shot off a letter to road secretary AK Upadhyay last week, stating that the move would further burden the public. Road users are already protesting against the existing toll, which is hiked every year, based on annual change in the wholesale price index (WPI).

According to NHAI sources, Singh has said that any further hike would only add to inflationary pressure. In February, the ministry had moved a draft cabinet note, proposing to further increase the toll on highways. Currently, highway toll is revised annually and is based on a 3% fixed rate plus 40 % of the yearly change in WPI. While proposing to retain the 3% fixed rate, the ministry had sought to increase the annual change in WPI to 70% from the existing 40%. This, sources said, will result in an approximate 20% increase in annual toll.

While questioning the rationale behind moving the proposal, the NHAI chief also took exception to the fact that while, on the one hand, the ministry did not find it prudent to consult NHAI even once before moving a draft cabinet note on a issue that directly concerns the agency, it (ministry) did not have any issue with the Planning Commission's over-interference during drafting the note.

Singh has said the proposed hike is not justified on any ground because, after a highway becomes operational, the concessionaire has to bear the maintenance cost – which, even after factoring inflation, accounts for just 2 % and interest cost (interest on borrowed money), the rates for which are fixed by banks based on base rate. Because of the competition, banks are already offering low base rates — resulting in just 1% -1.5 % increase in interest rate.

NHAI sources said that the existing policy of increasing toll based on 40% annual change in WPI is enough to handle both these costs. "A further hike is completely uncalled for and would only end up enriching the concessionaires," said a source.

The road ministry had, in March, sent the proposal to amend the toll rates to the finance ministry. The latter is yet to respond.