Toll collection likely to decline 17% if lockdown extended, says CRISIL

Highway toll collection may fall by 17% if the nationwide lockdown to contain the coronavirus is extended by a fortnight, ratings agency CRISIL said on Wednesday.

The National Highways Authority of India (NHAI) had stopped collecting toll till April 20 after the government imposed the lockdown on March 25 and then extended it twice.

Toll collection has restarted since, but there is unlikely to be a V-shaped revival in traffic after the lockdown ends – probably – on May 17. There will only be a gradual return to normalcy.

Toll collections and remittances from roads will fall a sharp 13% assuming there is only a 57-day lockdown (from March 22 to May 17). That decline will be an even sharper 17% if the lockdown is extended by another two weeks.

While construction of new highways is also affected, those constructed and commissioned over the past one year will help reduce the rate of decline in toll collections by more than half.

Over the long term (up to FY24), CRISIL Research expects toll collections to bounce back to a healthier compound annual growth rate (CAGR) of 11-12% on the back of new road construction. This, however, is lower than the 14.6% clocked in the preceding five financial years.

New road executions will hold the key to both reducing the impact of the lockdown in the immediate term and boosting growth over the long term.

Any further increase will likely come from new national highways. The NHAI executed 3,979 km of national highways in fiscal 2020 compared with 3,380 km in fiscal 2019.

That growth was driven by order backlog and the award of appointed dates for delayed hybrid annuity model (HAM) projects. The pace of execution is expected to pick up further to 3,500-4,000 km per year between fiscals 2021 and 2024.

While new highway completion is expected to fall 20-25% from the initial expectation this fiscal, completions of last would help stem a slide in numbers, CRISIL said.

Our base-case scenario (with lockdown ending on May 17) is traffic on existing stretches would de-grow 16.5% in fiscal 2021. Although some relaxations have been provided for the manufacturing sector in the recent guidelines, these are unlikely to help the sector revive immediately because of multiple factors such as hampered supply chains, persisting labour issues and slack end-consumer demand.

The lockdwon will have an adverse impact on the consumption of major commodities and therefore construction materials such as cement and steel, which account for a high share of freight traffic, will see a significant drop in consumption due to the fall in construction activity in fiscal 2021. Some other major commodities, such as agri produce and e-commerce, are, however, expected to support the freight traffic, thereby lowering the rate of de-growth.