Toll collections on national highways are expected to grow at a slower pace this financial year before picking up again in FY28. According to a report by ICRA, toll revenue growth will moderate to 7-9% in 2026-27, down from 10% last year.
The report further noted that the pace is expected to recover to 10-12% in 2027-28.
As per the report, the near-term slowdown is due to softer traffic growth and smaller toll rate hikes. It expects a rebound next year on the back of steeper toll rate revisions.
National Highway traffic growth, Toll rates to moderate in FY27
Traffic growth on national highways is closely linked to activity in construction, mining and manufacturing, ICRA said. Gross value added from these sectors rose 8.1% in 2025-26. That pushed highway traffic up 6% for the year. Combined with a toll rate hike, toll collections grew 10% in 2025-26.
For the current year, the ICRA report noted that GVA growth in these sectors to hold at 7-8%. Traffic growth is projected to ease to 4.5-5.5%, partly due to export-related disruptions. A more modest toll rate revision of 3.4-4.0% will add to the slowdown.
“Traffic growth on national highways largely moves in line with the gross value added (GVA) of construction, mining and manufacturing (CMM),” Suprio Banerjee, Co-Group Head, Corporate Ratings, ICRA, said. He added that the moderation this year reflects both softer traffic and a smaller toll rate hike.
WPI inflation to support higher highway toll rate hikes in FY28
The ICRA report linked the expected recovery in toll rate growth to movements in the Wholesale Price Index. WPI inflation is expected to ease amid the ongoing crisis in West Asia. The agency pegged WPI growth at 8.0-8.5% in December 2026 and 4.5-5.5% by March 2027.
Toll rates for newer projects are linked to the December WPI reading. These are expected to rise 6.2-6.4% in 2027-28. Older projects, linked to the March WPI figure, are likely to see increases of 4.5-5.5%.
MoRTH road awards seen rising to 8,500 km in FY27
According to the report, project awarding by the Ministry of Road Transport and Highways (MoRTH) is expected to rise to 8,000-8,500 km in 2026-27. That would mark an improvement from around 7,000 km awarded in 2025-26, which itself was down from 7,538 km in 2024-25.
According to the report, the earlier decline stemmed from the ministry’s focus on resolving land acquisition issues and securing environmental clearances before awarding projects. A higher budgetary allocation is now expected to support the pickup this year. Even so, awarding activity is likely to remain below the levels seen between 2020-21 and 2022-23.
Road construction to stay at 9,000-9,500 km in FY27
The report noted that actual road construction is expected to remain range-bound at 9,000-9,500 km in 2026-27, compared with 9,380 km in 2025-26. A continued slowdown in project awarding over the past three years was the main reason, the report said.
A sharp rise in bitumen prices, along with supply disruptions linked to the West Asian crisis, further hurt execution in the first quarter of 2026-27, as per the report.
“The moderation in road execution is primarily attributable to the sustained slowdown in project awarding activity over the past three years,” Banerjee said. He added that execution is expected to stay in the 9,000-9,500 km range this year as a result.
EPC dominates highway awards as BOT toll projects get fresh push
Engineering, procurement and construction (EPC) has remained the ministry’s preferred route for awarding projects, accounting for 65-70% of total awards over the past few years, as per the report. Hybrid annuity mode (HAM) projects made up 25-30% of awards in the same period. According to the report, HAM’s share is set to settle at 24-26% in 2026-27, with projects above Rs 500 crore likely to be awarded under the HAM or toll model.
While EPC remains the dominant mode, the ministry is gradually shifting focus toward build-operate-transfer (BOT) toll projects to widen their share of overall awards. According to the report, a new model concession agreement for BOT toll roads is central to this push.
The revised framework includes revenue support during periods of traffic shortfall and provisions for project termination. This is meant to reduce downside risks for developers and lenders while keeping incentives for efficient operation intact, the report noted.
NHAI, MoRTH highway bidding remains competitive despite tighter rules
Competition in NHAI and MoRTH EPC projects has stayed high despite the return of earnest money deposits and added performance security requirements. Median bid discounts widened from around 30% in 2024-25 to 35% in 2025-26, as per the report.
A similar trend has played out in HAM projects. Median discounts there rose from 16% in 2024-25 to 19% in 2025-26.
To keep bidding disciplined, the ministry brought in new performance security norms in June 2026 and tightened bidding rules further. It is also planning to award larger highway packages by bundling projects together. Even so, competition is expected to stay high given the ongoing slowdown in project awarding, according to the report.
Banerjee said the revival of BOT toll projects through the revised model agreement is a welcome step. He said it should help bring in more private sector participation in the roads sector. “However, the extent to which it translates into a meaningful revival in construction activity remains to be seen,” he said. He added that competition in the sector is unlikely to ease unless project awarding picks up in a big way, even with stricter bidding norms and project bundling in place.
Highway sector outlook: Toll growth to recover, Execution remains range-bound
Taken together, it seems like the sector is catching its breath before a stronger run next year. Toll collections are set to slow before recovering, and road awarding is expected to improve but stay short of the highs seen earlier this decade. Execution, meanwhile, is likely to stay flat as the effects of a three-year awarding slowdown continue to play out.