Road Toll Collections Growth Slowdown : ICRA

Road toll collections to see growth after four quarters of slowdown: ICRA

ICRA rating agency expects toll collections to witness high single-digit growth in FY19, followed by low double-digit growth in FY20, due to strong growth in sales of medium and heavy commercial vehicles and an increase in the wholesale price index (WPI).

ICRA, in its report on the toll roads sector, said the after-effects of demonetization, along with the GST implementation led to a weak first half in FY18 and limited the toll collection growth to 4.8 percent. The implied traffic growth in the first half of the current fiscal, too, remained moderate at 3.1%.

‘Major damper’

According to Rajeshwar Burla, Assistant Vice-President and Associate Head, Corporate Ratings, ICRA, demonetization has been “a major damper for the toll roads” which led to deceleration in growth for almost four consecutive quarters starting Q3 FY17 till Q2 FY18. Going forward, however, the sector will see a revival as higher growth in automotive sales will lead to a rise in traffic volumes, subsequently.

Burla said the latest commercial vehicle sales trend is encouraging with the medium and heavy commercial vehicle (M&HCV) cargo segment witnessing robust growth of 38 percent during eight months of FY19. Further, the average increase in WPI (toll rates are linked to WPI) for FY2019 is expected to be around 4 percent which is higher than FY18, he added.

Median traffic

According to ICRA, commercial vehicles account for around 65-70 per cent of the total vehicular movement on most of the country’s National Highways while passenger vehicles account for the remaining 30-35 per cent.

The toll sector has seen quote volatile collections, according to ICRA’s latest study on the performance of toll road projects in which it has analyzed 48 toll road projects with a median operational track record of six years. The agency said due to a prolonged slowdown in the economy, traffic volumes had started decelerating in 2013.

This, coupled with a slowdown in manufacturing and mining activity, following the ban on mining of several ores, has affected the project’s studies in FY14.

While in FY16 and FY17 the median traffic growth improved to 5.4 percent and 7.2 percent, respectively after the ban on iron-ore mining was lifted. The slowdown in the economic activity post demonetization has pushed back traffic growth to the level of just 4 percent in FY17.

Source: https://goo.gl/d5FN7c