High WPI inflation 'blessing in disguise' for toll road projects: Icra

Rating agency Icra said high Wholesale Price Index inflation is a blessing in disguise for toll road projects as toll collections are set to witness 14-15% growth in 2022-23

Rating agency Icra on Tuesday said that high Wholesale Price Index (WPI) inflation is a blessing in disguise for toll road projects as toll collections are set to witness 14-15 per cent growth in 2022-23.

Hikes in toll rates are linked to the WPI while the traffic volume is linked to underlying economic activity, primarily manufacturing, construction, and mining.

Typically, toll rates and traffic volumes are the two variables which determine toll collections.

Icra said in a statement that it expects the toll road projects to benefit from the high WPI inflation as it will lead to an increase in toll rates and thereby collections.

It also noted that the healthy growth in toll collections far outweigh the increase in maintenance costs.

WPI for December 2021 is expected to be around 13 per cent as against WPI of 2 per cent in December 2020, it said.