Vinayak Chatterjee: Can toll roads be made user-friendly?

September 26, 2014

Vinayak Chatterjee

The Rajasthan High Court, last Monday (September 1), stayed the hike in toll on the Jaipur-Delhi national highway till such time as the National Highways Authority of India (NHAI) and the operator file an affidavit confirming that the road is in good condition and that a proper and maintained highway exists that justifies the toll charged.

India has been obsessed historically with asset creation, not effective asset utilisation. Highway build-operate-transfer projects were largely seen as yet another construction project with immediate order-book gains for construction companies. Though the concession agreement specified operations, maintenance and tolling service delivery standards across the life of the project, no one paid much attention to them. Many concessionaires did not have the mindset or the experience to manage long-term assets of this kind, and the attitude was to generally get by NHAI inspections.

The ministry of road transport and highways is now keen to revive road construction activity with a slew of engineering, procurement, construction (EPC) contracts – totalling to almost 10,000 km in the here and now. Interestingly, it is understood that these EPC packages are getting bundled with five to 10 years of operation & maintenance (O&M) obligations too. This is an eminently sensible decision. With all this, thankfully, “asset management” is getting the required attention. Increasing road-asset acquisitions by long-term financial investors, pressure for maximising toll revenue, greater oversight from the judiciary, higher focus by NHAI and the ministry, and greater media and activist attention are also adding up. Many myths, hitherto used to justify poor O&M, seem to be getting exposed.

My friend and colleague Vivek Rastogi, who is a well-recognised expert in road operations and maintenance, has over the past few years been dissecting a few myths about highway operations and maintenance.

Myth one: Toll revenue is under pressure, so funds are short for operations and maintenance

Developers have been complaining about lower-than-anticipated traffic on their highways. This is indeed true in some specific cases where local and surrounding issues have lead to reduced movements. However, empirical data from different parts of the country reveal that the actual traffic over the last year, measured as passenger car units has increased by 2 to 12 per cent. This is also borne out by NHAI data. In addition, inflation-indexed toll rates have increased. Better tolling processes, wherever implemented, have boosted revenue, resulting in an overall 12 to 30 per cent increase in toll revenue in rupee terms. Therefore, toll revenue pressure is clearly not the overriding constraint particularly when one factors in that O&M expenses hardly ever exceed 3 to 5 per cent of toll collections. It is often a convenient excuse for complacency and lethargy among highway site-operations teams. Financially, the culprit is over-aggressive bids based on over-optimistic toll projections and under-estimated O&M costs that have not matched real life, thus leading to a “virtual” funds crunch.

Myth two: Lack of support from local administration

The experience on the ground is different, particularly in the bulk of the states where NHAI has the state support agreement in place. Barring sporadic incidents of politically-inspired attacks for media attention, most developers have received reasonable support from the police and district administration. The same holds for media, which has largely been publishing all sides of an “incident” story pretty fairly. This has helped get miscreants arrested at toll plazas. Traffic diversions for escaping tolls have been blocked by the district administration, and elected representatives in most cases, have been supportive of operations according to the concession agreement. Local problems will continue but it has now been seen that solutions can be found with regular and correct liaison with the district authorities.

Myth three: Route operations and route patrolling is an unnecessary spend

The purpose of route operations is to ensure that incidents and accidents on the highway get quick support and attention, and the traffic flows smoothly. Unfortunately, route operations and patrolling are often the first areas where operators try to cut costs with hugely deleterious effects on user satisfaction. It is a rare sight to see regular patrol cars, helpful signage and roadside amenities on Indian highways. Good route operation practices can save precious lives in highway accidents – an area of notoriety for India. This uncaring attitude is primarily based on the fact that road concessionaires still do not see themselves as “service deliverers”, where customer satisfaction and loyalty are necessary for survival as in the case of other businesses where customers have a choice. NHAI clearly needs far higher enforcement of standards in this area.

Myth four: Asset maintenance can be delayed

Roads typically have the following types of maintenance patterns: routine (preventive and reactive) and episodic (say, overlays in five years). In both the categories, the usual business practice is to delay matters till the road surface is either in a shambles or the spectre of penalties looms large. Sadly also, there is minimum use of technical advancements. The net result is a severe deterioration of the life-cycle quality of the asset as well as user-satisfaction. But the concessionaire believes he has “smartly” saved costs.

Myth five: Traffic tail-ending at toll plazas is inevitable

This need not be so. The ease with which cars zip through electronic toll barriers abroad clearly demonstrates the art of the possible. It is surprising that in India, we are not sufficiently agitated with the minutes we are required to wait before passing through a toll barrier. The slow pace of implementing cost-effective electronic tolling and dedicated electronic lanes is a testimony to our collective national lethargy on this aspect. Even without this, hand-held devices with roaming toll-collectors, aggressive marketing of on-board prepaid devices and systematic lane-management, could, if there is a will, actually seek to eliminate tail-ending at toll plazas.

Myth six: Continuing toll-collection during carriageway widening is appropriate

This is clearly addressed to NHAI and the ministry of road transport and highways. The existing model concession agreements, from their lofty perch, clearly did not see the practical problems of allowing toll-collection to continue when carriageway are being widened. It is clearly messy and has a high irritability quotient for all users. Further, it takes away from the spirit of a hassle-free drive questioning the rationale of the toll, and creates a strong negative perception which, as in the case of the Delhi-Jaipur highway, invites the wrath of the judiciary. This should be discontinued in future contracts.

There is clearly a growing need for a new generation of specialised outsourced “asset management partnerships” to manage the operative life-cycle of an asset properly and most importantly, deliver value to the customer. Myths will not do.

Source:Business Standard

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