Demonetisation: Highway toll collection to drop by a third

Toll collection are likely to drop by 33% owing to the demonetisation drive, ICRA said. 

Shubham Jain, Vice-President, ICRA, said, “Most road projects have been operating on a low buffer over DSCR, owing to various factors like low base traffic/ traffic growth, high premium payments and modest toll rate hikes on account of the prevailing low wholesale price inflation over the past few years.  

He added, "In this scenario, loss of at least one-third of the monthly toll revenues is likely to result in inadequate cash flows to service the debt commitments for November and December 2016. " 

Considering the average daily collection which is mostly  between Rs 40 lakh and more, the loss of toll revenue is estimated to be around Rs 460 crore for 10 day period for almost 115 toll projects of NHAI operated by private companies. 

Such losses over for the 10-day period is assumed by ICRA to result in significant liquidity stress for majority of  rated road projects, except the ones with a sizeable accumulated surplus and/or structural features like availability of Debt Service Reserve Account (DSRA). 

For the losses, the NHAI has also  declared partial compensation for the developers. 

In this regards,"ICRA expects the to opt for cash compensation, instead of extension of concession, considering the developers’ financial stress. Nevertheless, there is significant uncertainty regarding the quantum, mode and timing of such compensations," added Jain. 

Additionally, the National Highways and many states have provided immunity from tolling on the State Highway areas. 

However, ICRA assuring stated that these projects involves a very small percentage of the operational projects and overall credit impact on the sector can be substantial.

In a ICRA release, it was noted that in order to avoid traffic stress, the National Highway Authority of India (NHAI) had exempted tolling on its stretches to November 18. 2016. Earlier the exemption from tolling was allowed till November 11, 2016.