One bad apple

Highway tolling should not be given a bad reputation

One bad apple, it has been said, is sufficient to spoil the whole basket. So there is a clear risk that the unseemly end to which the enormous tollgate at Gurgaon (at the south-western border of Delhi, with Haryana) is headed could give tolling a bad name. That will be a pity; because, although it is true that globally only a small fraction of expressways have been built with risk capital provided by private investors, the total length thus built is nevertheless quite substantial and runs to around 10,000 kilometres. So the correct question to ask about the Gurgaon toll is what went wrong with it, in order to make sure that the same thing does not happen in the future.

There are three parties involved: the concessionaire, the National Highways Authority of India (NHAI) and a sleeping partner, the government, which was to receive around half the toll revenue. Within three years of tolling starting in 2008, disputes had arisen over poor service quality - entailing huge economic losses in terms of time and fuel as thousands idled at the tollgate - and the amount of revenue being actually collected. Eventually, a little over two years ago, the NHAI moved to cancel the arrangement - whereupon a fourth party emerged in the form of the lender who had financed the concessionaire. It turns out that it had lent far more than what was required and stood to lose a great deal of money if the contract was cancelled. It approached the courts and, as a result, a number of solutions were suggested - such as abolishing the tolling at the entry from Delhi in Haryana and moving it to another point about 15 km away. Thus, instead of collecting toll at two points, the concessionaire would collect a slightly higher toll at a single point and for a longer period. Unfortunately, this would let off free of charge hundreds of thousands of vehicles that do not cross the second tollgate. However, that part of Gurgaon, which lies between the two tollgates, is for all practical purposes a part of Delhi - which had disingenuously argued in 2007 that it would not allow around 11 of the 27 km to be tolled as they lay within its municipal limits. Overall, the solution under consideration is a sensible one and ought not leave anyone but the lenders worse off, and even they can get their money back in time.

One lesson is obviously that concessionaires chosen should fulfil a set of fit and proper criteria, as stringently applied as for financial institutions, because the opportunities for cheating are so high. Second, there should be strict enforcement of electronic tolling so that traffic doesn't have to be stopped for collecting the toll. Those who do not have such devices installed in their vehicles should be routed differently. Third, once a contract is signed, it should not be changed by any of the parties because often that is where the problems start. If these three things are done, there is no reason for tolling to get a bad name and public-private partnerships can proceed apace.