Rethink Tolling

October 12, 2006

There’s better road-pricing technology, use it

Recent news reports about the government’s new tolling policy rationale are disturbing. Marginal cost pricing permits tolls only to reduce congestion, but in India, tolls are more a user charge than a traffic management tool. Even so, project viability should not be the primary basis for setting tolls. Sensible public policy on tolls should focus on fostering development, by promoting use of the road, tempered by cost recovery. A key benefit of roads is the large spillover from better connectivity. High user charges would dampen usage and reduce this benefit, and may be self-defeating, even for viability.

Government-think conflates tolling and BOT (build-operate-transfer), but it’s possible to delink tolling from BOT in many ways—well beyond the simple BOT-annuity model. Even tolling and traffic can be separated, but here, too, one must recognise that traffic is an uncertain variable, and transferring traffic risk too early to private players can lead to undervaluation and large revenue losses for government.

Additionally, barrier tolling is a tested but blunt method of toll collection, with significant transactions costs—flowing from collection costs, population severance due to access control, and criminalisation, attracted by large cash collections. Indeed, the new MCA should have focused on modifying concession structures to address just such issues.

Fortunately, road-pricing technology is improving. We can move away from sectional tolling with frequent plazas that slow traffic and form a single system for national highways. With our dense mobile and broadband networks, we can implement smart inter-operable barrier-free road pricing systems, via a grid of electronic roadside devices and plazas that poll on-board vehicle units at regular intervals, and collect data usable for charging, such as the time of day, vehicle type, location and distance traveled.

Such a system is affordable even today. Similar software is being used by the Railways’ Freight Operations Information System and could be installed in short order, especially for heavy vehicles. Until then, Taiwan’s practice of a uniform toll at all plazas, where users pay with standard coupons purchased in advance, could be considered. The coupons confer additional benefits like low-cost working capital, easier revenue monitoring and reduced attractiveness for criminals, due to lower cash transactions. To begin, it can easily be implemented on NHDP’s completed non-BOT sections. Food for thought?