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2014 Media Kit
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Tariff dodging takes its toll on India’s highway developers

By: | at 12:45 PM | Intermodal  

Flashing lights on the roof, tailgating politicians’ motorcades, smashing up toll booths, and beating up toll collectors.

Welcome to India’s network of privately run highways, where endemic toll dodging is a drag on the finances of road operators such as GVK Power and Infrastructure and Reliance Infrastructure, and a deterrent to private investment in a country where poor infrastructure shaves an estimated 2 percentage points from economic growth each year.

Ambulances, fire trucks and the cars of senior government officials are among those exempted from paying tolls, but other drivers often claim a free ride, said Isaac George, GVK’s chief financial officer.

“If an MP (member of parliament) has to be exempted, it’s not just his car that is exempted. The entire entourage which follows or goes in front seeks an exemption,” he said. “The government has to do something because these are all revenue leakages.”

India’s cash-strapped government wants private companies to double their share of the cost of building roads and bridges by 2017 from about a fifth in the last five years.

Eight out of every 10 road projects, however, miss revenue expectations in their first year, with the shortfall as high as 45 percent, according to a 2012 study by Fitch Ratings. The slowing economy, and sometimes inflated forecasts, are partly to blame, but toll dodging is a significant factor, said Fitch India analyst S. Nandakumar.

“There is obviously resistance to tolling, particularly for brownfield or greenfield toll roads which have been tolled for the first time,” he said.

Theft, Beatings

The resistance to paying tolls is part of a wider pushback against India’s attempt to charge for services such as electricity that have been heavily subsidised or free, and which are plagued by under-investment.

Drivers use threats, violence, protests and claims of powerful connections to demand toll exemptions. Road developers lose up to a tenth of their toll revenues because of dodgers, said Vishwas Udgirkar, an infrastructure specialist at consultancy Deloitte.

IRB Infrastructure Developers could not levy tolls on one road for nearly two years due to protests in the western state of Maharashtra, where Mumbai is located. Charges began on Oct. 17, after a court ordered the local government to provide police protection.

Last month, security camera footage showed 6 men, armed with rods, assaulting staff and stealing money from a toll booth outside New Delhi. Two years ago, a toll collector was shot dead during a payment dispute at a booth near Gurgaon, where cars are charged 27 rupees (44 cents).

This lawlessness comes at an economic cost.

The government awarded less than a fifth of its target for new road construction contracts to private companies in the last fiscal year, official data shows. GVK and GMR Infrastructure both pulled out of road projects stalled by bureaucracy. In July, local media reported that IRB pulled out of bidding for a harbour crossing in Mumbai because of its toll collection woes in Maharashtra.

In a bid to tackle toll dodging and ease congestion at toll gates, Road Transport Minister C.P. Joshi said he wants all national highways to use electronic tolls by 2014.

A senior government official, however, was less concerned.

“I won’t deny this is an issue,” he said, declining to be named as he did not want to publicly speak about the issue. “We are not concerned about his (a company’s) loss of revenue. He should be concerned about it.”

Mafias & Minions

India’s toll roads tend to be better maintained and less congested than public routes. But unlike in Europe, for example, private roads, and not state roads, tend to become the main route between cities, leaving drivers with little choice.

This breeds resentment, especially if the road is pot-holed, unsafe or snarled by mind-numbing traffic.

Raju, who lives in Delhi, used to put a red flashing light on his car to pass himself off as a lawmaker to avoid tolls. He’s now befriended the driver of a genuine politician and often joins his entourage when travelling in northern India.

“They don’t provide facilities, so why should I pay a toll?” said Raju, who declined to give his full name. Highways are often congested, he said, and once, when he had a flat tyre on his way to a funeral, he waited two hours before help arrived.

Waiting for government help, and attitudes to shift, could take years.

K. Ramchand, managing director at road builder IL&FS Transportation Networks Ltd, said one way to manage toll dodgers was to let them have their way in the early days of the project.

“Most of the toll deviants are ... cars normally owned by either the local mafia, the minister or his cronies,” he said. “It’s safer to keep them on your side and give them a free pass.”

“Otherwise what happens is, these 30-40 followers come on the toll plaza, make a noise and then everybody falls into that mob mentality and then it becomes a big issue,” he added. (Reuters)