Growth in toll revenues led by traffic volumes witnessed in the last two years could come to a halt in the financial year 2017-2018. With traffic volumes still limping back to normal after demonetisation, the traffic is estimated to grow in the range of 4-5% in terms of the average annual daily traffic in FY18. A latest study by ratings firm Icra shows, coupled with the toll rate revision for FY18 which is estimated to be at 3.9% (new toll policy) or 5.3% (old), toll collection growth for the year is estimated to be around 9-11%.
“Unlike the last two years, wherein the growth was primarily driven by traffic volumes, the growth in FY18 would be toll rate driven,” said a statement from Icra.
The traffic growth suggests that the steady uptick seen up to Q2FY17 was dampened by note ban. “The implied traffic grew by 2.3% in fourth quarter of FY17 as against a traffic growth of about 10.2% during the fourth quarter of FY16. The deceleration is largely due to the decline in manufacturing and mining sector growth. Overall, the implied traffic growth declined to 6.4% in FY17 when compared to 10.1% in FY16,” the study finds.
Adjusted for demonetisation, the toll collection growth would have been in the range of 7-8% for FY17, it said. The vehicular traffic and most importantly freight movement is strongly correlated to GDP growth rate. About 60-65% of the freight traffic is dependent on mining and manufacturing sectors. Therefore, any contraction in these two sectors has a direct material adverse impact on freight traffic and thereby affects the toll collections.
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Shubham Jain, vice-president & sector head (corporate ratings) said: “Post-demonetisation, the construction GVA (gross value added) contracted by 3.7% in Q4FY17 after having expanded by 6% in Q4FY16; GVA growth for mining and quarrying moderated to 6.4% in Q4FY17 from 10.5% in Q4FY16 and manufacturing GVA growth declined to 5.3% in Q4FY17 from 12.7% in Q4 FY16. The result of this is evident in muted growth in traffic in Q4FY17.”