During the initial phases of highway development, the focus was primarily on timely delivery of projects. Over time though, a marked change has been observed, as the focus has shifted to user experience, safety, speed of response to emergencies, transaction time and quality of services. Funds have been pouring into the sector and the ownership profiles too have undergone a change. Somewhere along the way, the need for professional operations, maintenance and tolling (OMT) service providers was felt, in order to bring in specialised and focused operating capabilities to the sector.
Concessionaire concerns
Every concessionaire has its own index of decision points on whether to outsource operations or undertake them in-house. From a concessionaire’s point of view, it all boils down to deciding whether it is ready to create a huge manpower base and an organisational set-up to undertake operations rather than focus only on profitability and returns from the invested capital. The core competencies of the concessionaire and his business model also contribute to the decision to outsource.
Nevertheless, as operators and concessionaires are experts in their own domains, the kind of optimisation that an operations and maintenance (O&M) agency can deliver may or may not be possible for the concessionaire to undertake in-house with the same level of efficiency.
The expectation associated with outsourcing O&M is that once a project is outsourced to the contractor, the responsibility for all aspects of O&M get transferred. However, operators are of the view that this is not the case as it is always a partnership between both parties, the operator and the concessionaire.
The fact that the initial months after partnering with a concessionaire can be somewhat difficult for the operator is duly acknowledged by the operator community. Nonetheless, there is a necessity to develop and nurture understanding, trust and confidence on the part of both parties. The operator should understand the mindset of the concessionaire and the concessionaire needs to understand the limitations facing the operator.
The current requirement is to resolve the grey areas and speed up mutually beneficial decisions.
Experience and expectations: TOT model
Operators are keen to take up opportunities under the toll-operate-transfer (TOT) model as the model involves a long-term association with concessionaires and gives the former enough time to deploy more technology, processes and people on the ground. On the other hand, typical O&M contracts begin with a one-year period and get extended to up to three years. Hence, there is not enough time to deploy new technology or to increase investment in equipment.
Operators’ take on states
Operators believe that states certainly offer good opportunities. The decision to take up work on state roads is centred primarily on the location of the work and whether the operators will be able to add value to the project. Operators are working on state road projects in alliance with some concessionaires. They are, however, neither in direct contact with the state bodies nor have had any formal discussion with the state departments for O&M.
From an operator’s standpoint, there isn’t much difference between a state highway and a national highway in terms of service deliverables as both are routine O&M jobs. But toll exemptions on state highways create a problem as they interfere with the revenue stream of the clients.
Generally, state governments work on the lowest bid concept. They invite tenders and open the floor for all to participate. They are not on the lookout for any specialised value addition from a professional service provider as they do not look for any value addition for their projects by engaging specialised players to come in.
States also have revenue sharing contracts. The dynamics of a revenue sharing contract though are completely distinct from the regular OMT service contract that operators have with concessionaires.
Overall, the states that have provided a good experience and caught the eye of operators include Rajasthan, Madhya Pradesh, Gujarat and Tamil Nadu. Operators are open to talking to the state governments for the provision of O&M solutions in their respective states.
Tapping new technologies
With respect to tolling technologies, electronic toll collection (ETC) is the technology of choice. Nonetheless, it comes with its own set of challenges. These initial bugs need to be fixed not just from a technological perspective but also from a procedural one. With time these issues are likely to get resolved.
Apart from ETC, number plate reading is also a technology intervention in tolling aimed at increasing the accuracy of transactions as well as opening up a number of payment options.
For route operations, there has not been much by way of a technological change. In the near future, the use of drones is likely to be taken up on a greater scale.
Safety has now attracted increased attention and has made its way on to the priority list. Technology is expected to play a major role in highway safety as most of the functions are likely to be automated. This will obviate the need for manpower on highways.
In the future, technology in road construction and maintenance will be more visible. Moreover, technology is likely to be used for emergency management services such as incident management and ambulance deployment and to help lower response time and improve real-time monitoring of corridors.
The road ahead
Today, it is not just profitability that matters to O&M operators but also their reputation. An operator’s performance on a project will create business opportunities for the future.
The challenges faced by operators can be classified into internal and external, though it can be hard to clearly delineate internal factors from external ones. Further, the issues encountered by them are project specific in nature and vary with each project. Since revenue is important to every concessionaire, this, in turn, becomes a key variable for operators as well. In relation to revenue, tolling is a major concern area. Three key areas to focus on in order to check the revenue leakages from toll plazas are exemptions, classification of vehicles and counting of vehicles. Currently, the tolling management software and equipment utilised in toll plazas differs from operator to operator and from plaza to plaza. This, in turn, becomes a hindrance in the effective implementation of the ETC programme. There is an expectation among operators that some sort of a basic standard or commonality in terms of tolling management software and equipment across plazas is likely to evolve going forward.
Operators feel that when concessionaires build the road, they should invest more in technology, particularly with respect to toll plaza infrastructure. Good equipment at toll plazas should be invested in. Timely payment is extremely vital for service providers as they have to deal with manpower costs and compliances and do not have much cushion in terms of capital and margins. If they are unable to receive payments on time, their services get adversely affected. For enhancing user experience, it is crucial to impart some sort of user-friendliness training to each and every toll collector and others present on the lanes as a lot of time is wasted at the tolling gates.
Vandalism at toll plazas has been seen not just nationally but also internationally. It takes different forms for different kinds of projects. The issue of vandalism can be minimised by putting innovative ideas to work.
Going forward, the size of the outsourcing industry is certain to grow with constant learning for all the players involved. A major part of technological change will be seen in the sphere of maintenance activities which will go a long way in improving user experience and the quality of road infrastructure.
Based on inputs from Sandeep Channan, Senior Vice President, Business Operations, Egis Road Operation India; Colonel Ravinder Singh Phaugat, Vice President, Operation & Maintenance, Skylark Infra Engineering; and Surajit Raha, Chief Operating Officer, and Vijai Gupta, Head, Operations, Feedback Highways OMT, at a recent India Infrastructure conference