Nine toll road projects, awarded through public private partnership (PPP) route in Gujarat, will be impacted by implementation of toll exemption policy for passenger vehicles and state transport buses, rating agency Icra today said.
The Government of Gujarat exempted car/jeep/van category along with state transport buses from toll on state highways starting August 15, 2016, and plans to compensate the revenue loss incurred from such toll exemption, by way of monthly reimbursements for exempted vehicles.
Gujarat's toll exemption policy for passenger vehicles will "affect nine PPP road projects" and "pose a risk to state-led BOT model", Icra said in a statement.
These projects are Bhuj-Nakhatrana, Kim-Mandvi Road, Deesa-Panthavada-Gundari Road, Ahemadabad-Mehsana, Vadodara-Halol, Himatnagar Bypass, Rajkot-Vadinar section, Ahmedabad-Viramgam Maliya, and Halol-Godhara-Shamalaji.
Shubham Jain, Vice-President Icra said: "The actual traffic on a majority of these stretches is at around 60-65 per cent of that of initial estimates. Projects for which there is a revenue share payable to the Gujarat State Road Development Corp Ltd, have already sought deferment due to weak toll collections. Toll exemption for private vehicles and state transport buses will be an additional burden on the cash flow and would affect the debt-servicing capability further."
He said under the circumstances timely and adequate reimbursements from the state government body remain critical from the debt-servicing point of view.
Making the state roads toll free for passenger vehicles could result in increased usage of these stretches by these vehicles, either due to increased frequency of use or shift of traffic which was earlier re-routing through alternate routes to these stretches, Icra said.
The government has specified in case of an unreasonable rise in exempted traffic, it will restrict itself to the compensation considering reasonable traffic growth rate.
"For eight of the nine projects, the total revenue for FY16 is estimated to be Rs 5.01 billion. Assuming a growth of 6 per cent in toll collections every year, the total revenues during the concession period for these projects is estimated to be Rs 137.47 billion. Therefore, the total burden on the Government of Gujarat is estimated to be in the range of Rs 30.24-34.36 billion," it said.
Toll exemption is likely to result in disputes as the quantum of compensation in such cases is always not agreeable to all parties as seen in Maharashtra, Icra said and added at a time when participation from private sector is already low and lenders are cautious on lending for new infrastructure projects, the move could further dent lenders' confidence.
Of the nine projects, three are promoted by Larsen & Toubro, two by IL&FS Transportation Networks Limited (ITNL), two by Welspun Enterprises and one each by Ranjit Buildcon Limited and MS Khurana Engineering Limited.
On two of the projects promoted by ITNL, toll is also being levied on two-wheelers, whereas for the remaining seven it is being levied on cars and commercial vehicles.
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