Toll Tax in India Increases by 5%

On June 3rd, 2024, the National Highways Authority of India (NHAI) implemented a nationwide increase in toll tax by an average of 5%. This hike was initially scheduled for April 1st but was deferred due to the 2024 Lok Sabha elections. The rise in toll rates is expected to generate additional revenue for highway development and maintenance projects across the country. However, it has also sparked concerns about the financial burden placed on commuters and the potential impact on the transportation sector.

Understanding the toll tax

Toll tax is also known as user fee, is a levy imposed on vehicles which use specific designated roads, bridges, and tunnels. In India, the National Highways Authority of India (NHAI), is responsible for managing toll collection on national highways. The collected revenue plays a crucial role in financing the construction, upkeep, and expansion of these critical infrastructure projects.

Factors on which the toll tax is based

The cost you pay at a toll booth is determined by a number of key factors.

First being the type of vehicle, you’re driving. Cars typically have a lower toll than larger vehicles like trucks and buses. This is because heavier vehicles with more axles (the number of wheels supporting the weight) are considered to put more strain on the road, so they pay a higher toll rate.

Last being the distance you travel on the toll road itself is a big factor. The further you go, the more you’ll typically be charged. So, by considering the type of vehicle, the number of axles, and the distance travelled, toll authorities set fair prices for using their roads.

Reason for the Hike

The NHAI cites several reasons for the 5% increase in toll tax,

The primary justification is to account for inflation. Rising construction and maintenance costs necessitate adjustments to user fees to ensure the sustainability of highway projects. The toll hike aims to bridge the gap between increasing expenditure and stagnating revenue.

Second being development and upgradation. The additional revenue will be directed towards the development of new highways and the upgrade of existing ones. This includes improving road safety features, expanding lanes, and enhancing overall infrastructure quality.

And finally, maintenance costs. Maintaining existing national highways requires continuous investment in repairs, resurfacing, and upgrades. The toll increase will help finance these essential maintenance activities.

Impact of the Hike

The 5% hike in toll taxes is expected to affect various stakeholders differently, but regular commuters who depend on national highways for daily travel will feel the immediate impact. This increase will raise travel expenses, which may affect household budgets and the operations of businesses that depend on road freight. Consequently, there might be a shift to alternative routes, leading to possible congestion on roads without tolls.

The transport sector, especially logistics firms, are likely to face significant effects. Elevated toll fees may result in higher freight charges, influencing the cost of goods and services, and could contribute to inflation over time.

The tourism industry, which relies heavily on road travel, might also suffer. Rising toll expenses could deter tourists from embarking on road trips, affecting travel spending and possibly discouraging domestic tourism.

Conclusion

The NHAI anticipates that the toll increase will generate extra revenue for the government, which can be allocated to additional infrastructure development projects. This has the potential to positively affect the country’s connectivity and economic growth over the long term.

Nevertheless, the effectiveness of the toll increase hinges on a balanced strategy that focuses on infrastructure enhancement while reducing adverse effects on commuters and the wider economy. Achieving this equilibrium will necessitate ongoing conversations among the government, stakeholders, and citizens.