ICRA rating agency expects the toll collections to witness a high single-digit growth in FY19, followed by a double-digit growth in FY20, due to the strong growth in sales of medium and heavy commercial vehicles and the increase in Wholesale Price Index (WPI).

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

Demonetisation hits hard

According to Rajeshwar Burla, Assistant Vice-President and Associate Head, Corporate Ratings, ICRA, demonetisation was “a major damper for the toll roads”, which led the sector’s growth decelerate for almost four consecutive quarters from Q3 FY17 to Q2 FY18.

Going forward, however, the sector will see a revival as higher growth in automotive sales would lead to growth in traffic volumes. Burla noted that the latest commercial vehicle sales trend is encouraging with the medium and heavy commercial vehicle (M&HCV) cargo segment witnessing robust growth of 38 per cent during 8 months of FY19. Further, the average increase in WPI (toll rates are linked to WPI) for FY19 is expected to be around 4 per cent which is higher than this year, he said. “The combination of high M&HCV sales and the increase in WPI would result in toll collections witnessing double digit growth in FY2020,” Burla said.

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.

Six years for road sector

The toll sector has seen volatile collections, according to ICRA’s latest study on the performance of toll road projects. In this study, it analysed 48 toll road projects with a median operational track record of six years. The agency observed that the traffic volumes started decelerating in FY2013 due to a prolonged slowdown in economy.

This, along with the slowdown in manufacturing and mining activity, and the ban on mining of several ores, affected the projects studies in FY2014.

While in FY16 and FY17, the median traffic’s growth improved to 5.4 per cent and 7.2 per cent respectively, after the ban on iron-ore mining was lifted and manufacturing picked-up, the slowdown in the economic activity post demonetisation pushed back traffic growth to the level of just 4 per cent in FY17.