Industry
Highway toll revenue growth slows, may fall short of FY25 target
Summary
- India's highway toll collection may miss ₹70,000 crore target for FY25. But it's expected to pick up from next year onwards as more toll roads get commissioned.
India's highway toll collection growth is slowing and may fall short of the projected ₹70,000 crore in the current financial year, according to two persons aware of the development, mirroring the slowdown in the economy.
While new highway alignments and a rise in the number of toll stations may take this income to around ₹60,000 crore in FY25, but the actual growth will ease to a single digit against more than 40% and 16% seen in FY23 and FY24, respectively, the first among the two persons quoted said on the condition of anonymity.
India targets to more than double the toll revenue to ₹1.3 trillion by 2030. Lower revenue reflects muted highway traffic growth, indicating cooling business activity. India Ratings and Research projects the aggregate toll road revenue growth to moderate to 5.5-6% in FY25 from 12% in the previous year. The high-frequency indicator mirrors India’s gross domestic product (GDP) growth falling to the lowest in seven quarters at 5.4% in July-September.
The slower pace of growth was evident in the first half of FY25. Toll revenue in Q1 and Q2 grew 3.8% and 4.8% on-year—the cumulative growth in the first half stood at 4.3% over a year earlier.
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In the best-case scenario, collections may rise in the range of 6–8% in FY25, assuming that traffic growth maintains momentum and more plazas become operational, the second person quoted earlier said, also speaking on the condition of anonymity.
Queries emailed to the ministry of road transport and highways, the administrative department for the National Highway Authority of India, remained unanswered till press time. But a ministry official, who didn’t want to be identified, said the collection increases every year on account of traffic growth, revision in rates and the addition of new toll roads.
Toll or user fee worth ₹55,882.12 crore was collected at plazas on national highways in FY24, up from ₹48,032.40 crore in FY23 and ₹33,928.66 crore in FY22. As of October 2024, there were 1,015 toll plazas operational on national highways.
Aggregate collection surged during the post-covid period of FY22-FY24, driven by traffic rebound, hikes in toll rates and an increase in the Wholesale Price Index (WPI), said Dhamodharan, senior analyst at India Ratings.
The toll rates were raised by around 3.3% year-on-year in FY25 as the WPI inflation rose at a slower pace from 3 June 2024, according to MoRTH. The toll rates were increased by 5-10% in the previous years.
The Q2 traffic growth of around 1.5% on-year has been lukewarm even after considering the impact of monsoon during June-September. Traffic volumes, generally, have a correlation with the gross value added (GVA) of construction, mining, and manufacturing. India’s GVA is projected to grow 7.4% in FY25, according research report by Ind-Ra. GVA is a measure of growth that strips out the impact of indirect tax and subsidies.
While the traffic growth in the second half of a financial year is generally better, the inter-modal shift—shipping cargo via multiple modes of transport—in the commercial vehicle segment is likely to have a bearing on traffic growth, which could mute the correlation between traffic volumes and GVA, India Ratings said in its report.
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“While the lower toll rate hike and asset-specific reasons could be attributed for the lower toll growth in FY25, the overall traffic, especially freight, growth is likely to be influenced by the shift in the mode of transport amid the commissioning of dedicated freight corridors (DFCs) by FYE24," Dhamodharan said. “Diversion-related risks from the upcoming expressways and alternate modes of transport are likely to be the key factor in deciding the appetite for private investments."
Notwithstanding the slowdown this year, highway traffic and toll collections are expected to pick up from next year onwards as more roads, particularly access-controlled expressways, get commissioned. The Delhi- Mumbai expressway is expected to become fully operational in FY26, generating higher toll revenue for the government. Similarly, some of the pending projects from 34,800 km Bharatmala plan may also get commissioned.
The country's total length of tolled roads has nearly doubled since FY19 to over 50,000 km now.
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FASTag—the radio frequency identification (RFID) tags used for cashless payments—has also increased toll collections. According to The Ministry of Road Transport and Highways (MoRTH), 98% of the vehicles paid toll using FASTag on the national highways in 2023.
The highway ministry, however, has been falling short of its targets. MoRTH constructed 12,349 km of national highways in FY24, a 12.3% increase over 10,993 km in 2022-23, but short of the targeted 13,800 km.
Despite recording the second and third highest rate of highway construction in 2022-23 and 2023-24, the ministry has still not completed 25,000 km of roads announced as part of budget proposals for FY23.
