India's Toll System Unveiled: Powering Roads with Rs.1.3 Trillion
29 Mar 2024
4 Min Read
CW Team
Introduction
India's vast network of highways is not just a testament to connectivity but also to the
financial ingenuity that fuels its expansion and maintenance. Ever pondered over the
significance of those toll booths dotting the highways? In this article, we unveil the
mechanisms behind toll-based financing, the meteoric rise of toll revenues, and the projected
financial trajectory fueling India's road infrastructure.
The Evolution of India's Toll System
The roots of India's toll system trace back to the visionary initiatives of the 1990s under
Prime Minister P.V. Narasimha Rao's leadership. Faced with daunting challenges in funding
highway construction and upkeep, tolls emerged as a targeted revenue-generating solution.
Fast forward to the present, and we witness a paradigm shift in toll collection methods with
the advent of electronic toll collection technologies.
In 2010, the Ministry of Road Transport and Highways spearheaded efforts to unify
electronic toll collection technologies. This led to the establishment of the Indian Highways
Management Company Limited (IHMCL) in 2012, marking a pivotal step towards a
streamlined toll collection ecosystem. The subsequent introduction of the National
Electronic Toll Collection (NETC) platform by the National Payments Corporation of India
(NPCI) in 2016 heralded a new era of interoperability and efficiency in toll collection.
The Financial Landscape: Surge in Toll Revenues
The financial prowess of India's toll system is staggering. From ₹17,759 crore in 2015-16 to
₹48,028 crore in 2022-23, toll revenues have witnessed a meteoric rise, reflecting a robust
15% annual growth trajectory. With the government eyeing a monumental ₹1.3 trillion
revenue mark by 2030, the toll system emerges as a formidable contributor to India's
infrastructure coffers.
The National Monetization Pipeline forecasts ₹6 trillion in revenue by 2024-25, with roads
constituting a significant chunk. States like Uttar Pradesh, Rajasthan, Maharashtra, and
Gujarat lead the charge, contributing over 40% of toll revenue. As per the NITI Aayog, the
National Monetization Pipeline projects ₹1.6 trillion in revenue, primarily driven by highway
monetization.
Deciphering Toll-Based Financing Models
Toll-based financing models serve as the backbone of India's highway development
endeavors. From Build-Operate-Transfer (BOT) to Toll-Operate-Transfer (TOT), each model
offers a distinct approach to financing and operation. The Annuity Model, Hybrid Annuity
Model (HAM), and Engineering, Procurement, and Construction (EPC) Model further diversify
the financial landscape, catering to varied project requirements and stakeholder interests.
Innovative financing mechanisms like bond issuance and Infrastructure Investment Trusts
(InvITs) inject dynamism into the toll financing ecosystem. Bond issuance provides a
sustainable avenue for raising capital, while InvITs offer investors a stake in highway assets,
facilitating infrastructure development while ensuring attractive returns.
Pros and Cons of Toll Roads
Toll roads embody both promise and contention. On the one hand, tolls serve as a vital
revenue stream for infrastructure development, ensuring quality maintenance and expedited
project execution. Moreover, tolls play a pivotal role in alleviating traffic congestion and
fostering sustainable mobility solutions.
However, the toll system is not without its detractors. Concerns regarding the financial
burden on users, potential monopolies, equity disparities, and public resistance underscore
the nuanced landscape of toll-based financing. Yet, technological advancements continue to
mitigate these challenges, paving the way for a more efficient and equitable tolling
ecosystem.
Technological Innovations and Sustainability
The evolution of tolling techniques epitomizes the marriage of technology and sustainability.
From RFID to FASTag and Electronic Toll Collection (ETC), the journey towards seamless
tolling experiences is marked by leaps in efficiency and convenience. Notably, the transition
from cash collection to card-based systems signifies a quantum leap in user experience and
operational efficiency.
As governments worldwide prioritize climate resilience and carbon reduction, tolling
emerges as a potent instrument for financing sustainable infrastructure. By leveraging toll
revenues to bolster investments in green infrastructure, India stands poised to lead the
charge towards a more sustainable transportation landscape.
Conclusion
India's toll system is not merely a financial apparatus but a testament to innovation and
resilience in infrastructure financing. As toll revenues surge and technological
advancements redefine tolling experiences, the trajectory of India's road infrastructure is
poised for unprecedented growth. By embracing innovation, fostering collaboration, and
prioritizing sustainability, India can unlock the full potential of its toll system, ensuring
efficient mobility and an enhanced quality of life for its citizens.
Explore more:
Introduction
India's vast network of highways is not just a testament to connectivity but also to the
financial ingenuity that fuels its expansion and maintenance. Ever pondered over the
significance of those toll booths dotting the highways? In this article, we unveil the
mechanisms behind toll-based financing, the meteoric rise of toll revenues, and the projected
financial trajectory fueling India's road infrastructure.
The Evolution of India's Toll System
The roots of India's toll system trace back to the visionary initiatives of the 1990s under
Prime Minister P.V. Narasimha Rao's leadership. Faced with daunting challenges in funding
highway construction and upkeep, tolls emerged as a targeted revenue-generating solution.
Fast forward to the present, and we witness a paradigm shift in toll collection methods with
the advent of electronic toll collection technologies.
In 2010, the Ministry of Road Transport and Highways spearheaded efforts to unify
electronic toll collection technologies. This led to the establishment of the Indian Highways
Management Company Limited (IHMCL) in 2012, marking a pivotal step towards a
streamlined toll collection ecosystem. The subsequent introduction of the National
Electronic Toll Collection (NETC) platform by the National Payments Corporation of India
(NPCI) in 2016 heralded a new era of interoperability and efficiency in toll collection.
The Financial Landscape: Surge in Toll Revenues
The financial prowess of India's toll system is staggering. From ₹17,759 crore in 2015-16 to
₹48,028 crore in 2022-23, toll revenues have witnessed a meteoric rise, reflecting a robust
15% annual growth trajectory. With the government eyeing a monumental ₹1.3 trillion
revenue mark by 2030, the toll system emerges as a formidable contributor to India's
infrastructure coffers.
The National Monetization Pipeline forecasts ₹6 trillion in revenue by 2024-25, with roads
constituting a significant chunk. States like Uttar Pradesh, Rajasthan, Maharashtra, and
Gujarat lead the charge, contributing over 40% of toll revenue. As per the NITI Aayog, the
National Monetization Pipeline projects ₹1.6 trillion in revenue, primarily driven by highway
monetization.
Deciphering Toll-Based Financing Models
Toll-based financing models serve as the backbone of India's highway development
endeavors. From Build-Operate-Transfer (BOT) to Toll-Operate-Transfer (TOT), each model
offers a distinct approach to financing and operation. The Annuity Model, Hybrid Annuity
Model (HAM), and Engineering, Procurement, and Construction (EPC) Model further diversify
the financial landscape, catering to varied project requirements and stakeholder interests.
Innovative financing mechanisms like bond issuance and Infrastructure Investment Trusts
(InvITs) inject dynamism into the toll financing ecosystem. Bond issuance provides a
sustainable avenue for raising capital, while InvITs offer investors a stake in highway assets,
facilitating infrastructure development while ensuring attractive returns.
Pros and Cons of Toll Roads
Toll roads embody both promise and contention. On the one hand, tolls serve as a vital
revenue stream for infrastructure development, ensuring quality maintenance and expedited
project execution. Moreover, tolls play a pivotal role in alleviating traffic congestion and
fostering sustainable mobility solutions.
However, the toll system is not without its detractors. Concerns regarding the financial
burden on users, potential monopolies, equity disparities, and public resistance underscore
the nuanced landscape of toll-based financing. Yet, technological advancements continue to
mitigate these challenges, paving the way for a more efficient and equitable tolling
ecosystem.
Technological Innovations and Sustainability
The evolution of tolling techniques epitomizes the marriage of technology and sustainability.
From RFID to FASTag and Electronic Toll Collection (ETC), the journey towards seamless
tolling experiences is marked by leaps in efficiency and convenience. Notably, the transition
from cash collection to card-based systems signifies a quantum leap in user experience and
operational efficiency.
As governments worldwide prioritize climate resilience and carbon reduction, tolling
emerges as a potent instrument for financing sustainable infrastructure. By leveraging toll
revenues to bolster investments in green infrastructure, India stands poised to lead the
charge towards a more sustainable transportation landscape.
Conclusion
India's toll system is not merely a financial apparatus but a testament to innovation and
resilience in infrastructure financing. As toll revenues surge and technological
advancements redefine tolling experiences, the trajectory of India's road infrastructure is
poised for unprecedented growth. By embracing innovation, fostering collaboration, and
prioritizing sustainability, India can unlock the full potential of its toll system, ensuring
efficient mobility and an enhanced quality of life for its citizens.
Explore more:
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