Introduced in 2009 by the National Highways Authority of India (NHAI), the operations, maintenance and tolling (OMT) model has emerged as a distinct industry in itself. This is on account of the fact that both NHAI and private developers/investors are looking to outsource these areas, leading to the entry of specialised OMT players. However, in the recent past, the pace of project award has slowed down as operations and maintenance (O&M) players in the country are shying away from existing public-private partnership models for maintenance as a result of issues faced in the past.
At present, there are 42 operational toll plazas under OMT projects on national highways. The majority of these are located in Rajasthan, followed by Tamil Nadu and Uttar Pradesh. Some of the key OMT projects are the 316.08 km Lalitpur-Lakhnadon section, the 285.07 km Muzzaffarpur-Purnea section, the 260.5 km Palanpur-Radhanpur-Samakhiyali section, the 251.16 km Hyderabad-Bengaluru section and the 243.17 km Madurai-Kanyakumari section.
At the state level, the OMT model has received limited acceptance with only a few states such as Madhya Pradesh, Karnataka, Maharashtra and Bihar undertaking such projects. The Madhya Pradesh Road Development Corporation (MPRDC) is implementing 19 projects spanning 1,093.53 km on an OMT basis. Besides, there has been a growing focus on tolling stretches of state highways, especially in Karnataka, Rajasthan and Haryana. Meanwhile, the Andhra Pradesh government plans to hand over 4,000 km of state highways for maintenance to private companies on a pilot basis. These highways will be handed over for a period of five years under the long-term performance- based maintenance contracts. Further, the West Bengal government has also approved a proposal to levy toll and user charges on state highways.
Impact of FASTag
In the past three years, there has been a substantial increase in the toll revenue collected by the Ministry of Road Transport and Highways (MoRTH). It grew from Rs 181.48 billion in 2015-16 to Rs 228.21 billion in 2017-18. This increase can be attributed to the growing use of FASTag for electronic toll collection. As of October 2018, FASTag is active at over 430 toll plazas across the country and its penetration has reached 25 per cent in value terms. Recently, the MoRTH signed an MoU with major oil manufacturing companies to enable the sale of FASTags at their petrol pumps. This move is expected to provide a further boost to FASTag deployment. The government has also laid out plans to revamp the toll policy for national highways to allow people to pay toll for the distance they cover and not the entire stretch of highway. Currently, “the pay as you use” or closed tolling system is being implemented for the Eastern Peripheral Expressway and will also be used for the Western Peripheral Expressway.
Several initiatives have been taken by NHAI to facilitate tolling of highway stretches. It has decided to create a new highway operations division, which will focus on all non-commercial activities of operational highways. These include electronic tolling, wayside amenities, and road safety and security. In addition, around 46 highway nests (mini) have already been constructed while these are under construction at 372 toll plazas. These facilities will enhance the travel experience by providing safe stopping points to commuters. Meanwhile, the Eastern Peripheral Expressway became the first expressway in the country for which weigh-in-motion (WIM) sensors have been deployed at all 30 entry points. The WIM technology prevents road damage by ensuring that vehicles are not overloaded.
In the coming years, opportunities in the OMT market are expected to grow manyfold as an increasing number of build-operate-transfer and hybrid annuity model (HAM) players exit their current projects, thereby creating opportunities to contract these projects on an OMT basis. Besides, the rising penetration of OMT and HAM stretches in states such as Karnataka, Bihar, Madhya Pradesh and Maharashtra also augur well for the segment. The toll-operate-transfer model is also expected to provide a major boost to the road sector by channeling funds into the construction of new highway projects, in turn, necessitating O&M works. However, persistent issues such as exemptions, toll resistance, political pressure and lack of flexibility in the concession agreement require immediate attention.