Under-reporting of toll collection has been a matter of concern for the Government, and the issue has threatened the future of many road projects which are on BOT basis.
With the National Highways Authority of IndiaÂ´s (NHAI) plans to take on 26 road projects on the grounds of under-reporting, the fallout on the road sector is likely to be huge.
The country has 70,000 km of highways where tolls are collected. NHAI has a growing suspicion of misappropriation of toll revenues and underreporting of traffic. These road projects have a revenue-sharing contract with NHAI. But according to experts, underÂ¡reporting traffic and toll revenue is rampant among B and C grade developers.
The burning issue
Now, that the NHAI is expecting the losses to the exchequer to be more than 20 per cent of projected total toll collections, the question that arises is will these projects be subject to Comptroller and Auditor General (CAG) scrutiny?
Â´Issue of underreporting of toll may not go to CAG as NHAI has experience in handling such cases,Â´ says a top official from NHAI who preferred to remain anonymous. He told Infrastructure Today that the authority is planning to conduct audits similar to forensic ones and is in talks with several auditors and legal firms for future action.
Â´It (forensics auditing) should be on a case-to-case basis, where discrepancies have been identified,Â´ says Parag Parekh, Chief Financial Officer, Gammon Infrastructure Projects Ltd.
For instance, NHAI had last year filed a First Information Report (FIR) against the Delhi-Gurgaon Expressway operator after a Parliamentary panel as well as a forensic audit by an independent auditor (KPMG) alleged that there is a visible difference in the number of vehicles passing through the 32-lane plaza at the Delhi-Gurgaon border and the number that the concessionaire actually reports to the NHAI.
In September last year, a meeting between NHAI officials and the Ministry of Road Transport and Highways reveals that the audit conducted by KPMG had shown a huge difference in motor traffic based on a manual count carried out by them, compared with the report submitted by the concessionaire, amounting to a loss of Rs 15.58 lakh a day to the exchequer.
IT spoke to various road developers, who said that companies who had no disrepancies in their accounts need not worry about any punitive action. But they are apprehensive that even these companies would be mired in bureaucratic hurdles as the NHAI would keep a check on each and every toll project.
Â´As far as underreporting of revenue is concerned, the steps to be taken by NHAI clearly suggest that the roll road operators have taken an undue advantage,Â´ says Arvind Mahajan, Partner and Head of Global Infrastructure and Energy and Natural Resources, KPMG
He adds: Â´By deciding to conduct a forensic audit on suspicious toll road projets, NHAI has sent a strong message to private developers, but this can be fruitful only after an investigation, which is likely due.Â´
Meanwhile, the source from NHAI says that auditors have already been appointed for eight of the 26 projects. Some of these projects under scrutiny are of GVK and Soma Infrastructure. GVK Jaipur Expressway Private LimitedÂ´s (GJEPL) Jaipur-Kishangarh road project, and even SadbhavÂ´s Bijapur Hungund tollway project. These projects already have audit going on. Surat-Dahisar, Panipat-Jalandhar, Chennai-Tada, Vijayawada-Chilakaluripet and Gurgaon-Jaipur road toll projects are also under the scanner.
Â´Greater transparency in toll setting, linking payment quantum to actual usage, vigorous implementation of electronic tolling to reduce congestion at toll plazas and last but not the least offering a substantially differentiated product – would all help,Â´ says Athar Shahab, CEO-Infrastructure and Real Estate, Sesa Sterlite.
To this Vivek Rastogi, Managing Director, Feedback Brisa Highways OMT says, Â´In essence, the toll plazas are delivering the purpose for which they were created. However, there is room for improvement.Â´ He adds: Â´Corruption on operate-maintain-transfer (OMT) continues to be a major bane and it will take more to eliminate this.
These investigations are being undertaken to see whether there are any cases of under-reporting of road toll revenues. An earlier audit had revealed that NHAI had lost Rs 24 crore in revenue sharing. The entity is also looking at online streaming at toll road booths.
Meanwhile, there are clear-cut indications from NHAI that if a project operator is found guilty after the forensic audit, there will be termination on account of the concessionaireÂ´s default, which is the only option left with NHAI to protect the interest and put an end to the misery of road users at toll plazas.
According to private developers, the under-reporting is a matter of human errors of omission. Whereas NHAI officials argue that itÂ´s a pure case of Â´fraudÂ´.
But experts point out that since there is no mechanism to check traffic passing through the tollgates, there is vast scope for understating toll earnings. The fraud happens there. Here, Arvind Mahajan from KPMG suggests that to avoid further incidents NHAI should conduct a periodic third party audit. To this, Parekh from Gammon says that the deployment of latest technology can avoid revenue leakages in the future.
A case in point is the same Delhi-Gurgaon Expressway where the highway authority has installed automatic vehicle counter-and-classifiers in all the 32-lanes. When a vehicle drives past the sensor, a snapshot is taken and it is counted and categorised in a server. Once operational, NHAI is confident the system will bring an end to any under-reporting.
Can India become a toll-free country?
The decision of closing 44 toll roads in Maharashtra was a politically motivated move, rather than an exercise towards the public interest. It is expected that with closing of these toll roads, the State may face a financial burden of Rs 306 crore. Of these 44 toll posts, 34 belonged to the public works department (PWD) while 10 are of the Maharashtra State Road Development Corporation (MSRDC). In addition, now the PWD Minister of Maharashtra, Chhagan Bhujbal, who had defended toll road contracts, has come out in public and has demanded to close down tolls for roads operated by the NHAI.
Taking this case forward, the question crops up, whether India can do away with toll road projects?
First, all roads need not be tolled. Only trunk routes i.e., National Highways and select State Highways should be tolled. People must have toll-free alternatives to choose from. That said, to finance a large scale programme like NHDP, India will need to rely on toll revenues, regardless of how roads are built. There are areas that can be improved, though.
Â´Abolishing tolls is a bad idea and would affect new asset creation and long-term maintenance in the highway sector,Â´ says Shahab. Rastogi adds, Â´Today, Indian road users do not have a choice and this is not going to change in the country for many years to come.Â´
Meanwhile, the toll roads have generally provided better and safer infrastructure. Although experts wish that the government should have gone further for access control and greater component of flyovers, underpasses, overpasses and service roads to enhance service levels, these have not been encouraged by previous governments in the name of cost cutting.
Â´In essence, the toll plazas are delivering the purpose for which they were createdÂ´
Vivek Rastogi, Managing Director,
Feedback Brisa Highways OMT Pvt Ltd.
Â´Toll operators have taken undue advantage of NHAIÂ´
Arvind Mahajan, Partner and Head of Global
Infrastructure and Energy and Natural Resources, KPMG.
Â´The deployment of latest technology can avoid revenue leakages in the futureÂ´
Parag Parekh, Chief Financial Officer,
Gammon Infrastructure Projects Ltd.
Toll collection is imperative for survival of projects?
Since all the BOT road projects have debt component involved, it can be recovered only through toll, says Vivek Rastogi, Managing Director, Feedback Brisa Highways OMT Pvt Ltd.
Have tolls been able to achieve the aim for which they were constructed?
Globally, most roads and expressways are constructed by governments and only a handful of assets are built on a Public Private Partnership (PPP) basis. The situation in India is different where the share of PPP projects is more than the roads built by the government. These projects have been funded with significant amounts of debt which needs to be serviced and thus toll collection becomes an imperative for survival of these projects and the financial institutions behind them.
While tolls were constructed to improve condition of the roads
and highways and have basic facilities for safety and smooth movement in place, not much has been achieved in that regard. What can be done to improve this situation? The traffic movement has greatly improved on the National Highways though this is not the same across all stretches. Safety continues to be a major concern on most Indian roads. There are two reasons for the current situation: The projects were bid with more aggression than merit and as a result, now the toll is not enough to meet operating expenses and also to service the debt. This has led to cost cutting in maintenance and route operations (for better safety and incident management). The other reason is that the regulators until recently paid less attention to safety and maintenance ? the penalties and demands on this front are gradually increasing and this is beginning to show results.
If Indian roads are made toll-free, what happens to the players involved in the running of tolls across the country?
This is a hypothetical question for now. However, if this was to happen, these companies would evolve into other similar businesses as has taken as place in some parts of the world.