FASTag annual pass for private vehicles may cut toll road operators' revenue
The deficit may need to be compensated under the concession agreement, and hence timely finalization and implementation of the compensation framework will be crucial, Crisil said.
In the interim, credit risk profiles of Crisil Ratings-rated toll operators are expected to hold steady, aided by adequate cash flow cover, it said, citing an assessment of 40 operational toll road projects.
The annual pass will be applicable from 15 August for private vehicles—cars, vans and jeeps. The pass will cover up to 200 trips or a year from the date of activation (whichever is earlier). At present this pass will be applicable for national highways and national expressways.
Based on Crisil's assessment, a private vehicle typically pays ₹ 70-80 per trip currently. Therefore, the annual pass, if used for all 200 trips, will effectively translate mean a saving of up to 80% or ₹ 55-65 per trip.
Anand Kulkarni, Director, Crisil Ratings, said, 'Private vehicles form 35-40% of the overall traffic plying on the stretches in our sample. In terms of revenue, the share is lower at 25-30%.
Assuming a third of these vehicles purchase the annual pass, revenue of toll operators will be impacted by 4-8%. This may need to be compensated for. Timely finalisation of the compensation mechanism and swift implementation will reinforce the confidence of the private sector which plays a key role in funding the growth of the sector.'
The compensation process will involve consultation with stakeholders and finalization of modalities which could lead to some delays.
Saina S Kathawala, Associate Director, Crisil Ratings, said. 'Credit profiles of our rated toll road projects are expected to withstand potential timing mismatches between implementation of the annual pass and finalization of the compensation mechanism. If there is a six-month lag in receipt of first compensation and a third of private vehicles opt for the annual pass, the DSCRs will have a minimal impact this fiscal. Additionally, adequate liquidity of at least one quarter will support credit risk profiles. Once the compensation mechanism is established, the DSCRs will return to their current levels.'
The shift to the annual pass would entail an additional process of getting compensation from the National Highways Authority of India (NHAI), the implementing agency, vis-à-vis the current process of real-time toll collection from users.
The robust payment track record of NHAI, as seen in the case of annuity projects, will mitigate the counterparty risk.
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