Latest News | Road Projects to See 2-5 Pc Hike in Inflation-linked Toll Rates in FY24: Report

Mumbai, Feb 13 (PTI) Inflation-linked toll rates of various road projects will see a moderate hike of 2-5 per cent in the next fiscal year due to falling wholesale price index, a report said on Monday.

Rating agency Icra has revised down the outlook on the toll road sector to stable from positive for FY24, citing the easing wholesale price inflation which fell to 4.95 per cent in December 2022.

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The wholesale price index (WPI) based inflation is expected to fall further and is likely to settle at sub-2 per cent in March 2023.

Accordingly, the inflation-linked hike in toll rate will be relatively modest at 2-5 per cent in FY24 compared to the 8.7-14.6 per cent hike in FY23, the agency said in its latest note.

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On the change in the outlook to stable from positive, it said the revision primarily reflects the expected moderation in toll collection growth to 6-9 per cent in FY24, compared to a stellar 17-20 per cent growth in FY23, which was driven by a healthy toll rate increase on the back of high inflation as well as improved economic activity.

Number of road users or traffic volume and toll rates are the major factors that affect toll collection in the country.

Traffic volume has a strong correlation with the gross value added of construction, mining and manufacturing, as around 65 per cent of the freight traffic is dependent on these sectors. Growth in these sectors is estimated to be 5-7 per cent in FY24 and is likely to result in 4-5 per cent growth in the overall traffic volume, the agency said.

Vinay Kumar G, sector head of corporate ratings at Icra, said toll rates linked to the December WPI will see a 5 per cent growth while those linked to March WPI will see only sub-2 per cent growth. Consequently, toll collection growth in FY24 is estimated at 6-9 per cent, primarily supported by 4-5 per cent growth in traffic.

Despite a moderation in toll collection growth, lower outflow towards operation & management and major maintenance expense on account of the recent moderation in key commodity prices, especially bitumen and steel, should support debt coverage metrics of toll road assets, he added.

There is a 25 per cent jump in gross budgetary support for the road ministry at Rs 2.59 lakh crore in FY24 from Rs 2.06 lakh crore in FY23, which should support the increased road project execution target of 14,500 kilometres against 12,000 km in FY23.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)