Mumbai: Operators of large toll road projects were expected to suffer a severe decline in toll revenue and traffic volume in the aftermath of India’s demonetisation exercise, but early signs of recovery are already visible in key urban markets, officials at these companies said.
MEP Infrastructure Developers Ltd, which operates 30 toll plazas on national highways, has seen traffic volume recover in its Mumbai projects after a decline in December, said managing director Jayant Mhaiskar.
“On national highways, however, toll revenue has seen a decline of 15%-18% and traffic volume decline of 8%-10% due to low trucks movement,” Mhaiskar said.
He added that growth is likely to be flat for the sector in the current quarter ending March.
Toll operators were mandated by the government to exempt all vehicles from paying toll across national highways between 9 November and 2 December to ensure smooth flow of traffic after the withdrawal of Rs500 and Rs1,000 banknotes on the evening of 8 November. Toll collections resumed from 3 December but traffic volume had plunged on account of low economic activity.
Road projects had seen traffic growth of about 6% in fiscal 2016 and equivalent in the first half of the current fiscal, but overall traffic growth at the end of the current fiscal is expected to be lower.
For Sadbhav Infrastructure Projects Ltd, toll collection across its portfolio of road projects for the 29 days in December had fallen 3.7% year-on-year with some projects showing growth and others a decline, according to brokerage Equirus Securities.
“Projects (of Sadbhav) with high commercial traffic like Bijapur Hungund, Dhule Palasner and Maharashtra Border have been impacted the most on a year-on-year basis. On the other end, certain projects like Shrinathji Udaipur and Aurangabad Jalna have witnessed y-o-y growth. Projects like Ahmedabad Ring Road, Hyderabad Yadgiri and Rohtak Panipat have been impacted the least,” Equirus said in a note to clients on Monday.
But traffic is returning, according to Shubham Jain, vice-president at rating agency ICRA Ltd. “Toll operators had seen low traffic and toll-collections in the initial two weeks of December but have since recovered, and now toll-collections are reaching similar levels as pre-demonetisation,” Jain said.
Various factors can hurt traffic volume and toll-revenue growth in road projects, including weak economic activity, presence of alternative routes, low rate of inflation and a declining trend in the Wholesale Price Index (WPI). Rise in traffic and toll collections recorded by several highway operators last year had helped improve investment sentiment at a time when many companies have looked at monetizing operational assets.
“Overall I think there is some reduction in traffic but it varies across our projects as some have also seen an increase in traffic. December numbers for us would largely be flat year-on-year than a decline. Traffic has already started improving,” said K Ramchand, managing director of IL&FS Transportation Ltd (ITNL), one of the largest developers of build, operate, and transfer (BOT) road assets in India.
India has the world’s second largest road network, with about 4.8 million km, but national and state highways constitute a small percentage of that network. Only 24% of the national highways have four lanes or higher, indicating opportunities for expansion.