In line with the government’s digitisation push, the National Highways Authority of India (NHAI) has made FASTags mandatory from 15 January for vehicles using national highways.
What is FASTag?
It is an electronic toll collection system in India, operated by the National Highway Authority of India (NHAI). It employs Radio Frequency Identification (RFID) technology for making toll payments directly from the prepaid or savings account linked to it or directly toll owner. It is affixed on the windscreen of the vehicle and enables to drive through toll plazas without stopping for transactions.
- Plugging revenue leakages – With the implementation of FASTags, toll collection efficiency in India will be near 100% in the short to medium term, and projects witnessing toll violations and leakages are expected to reduce more than 90%. The biggest beneficiaries will be urban stretches or projects in states with weak on-ground enforcement support.
- Reduction in operations and maintenance costs by 8-10% – Manpower requirements to collect toll and manage traffic at toll plazas will come down by close to 50%, once the system is fully stabilised. Savings will, however, materialise only after the initial teething issues, such as manual handling of blacklisted tags and consumer awareness on lane compliance, are solved.
How will it benefit the infrastructure sector in India?
- Improved debt servicing ability – Given that around one-fifth of NHAI Build-Operate-Transfer (BOT) projects are in stress or close to stress, improved top-line and margins will be a boon. Given that the formula for altering the concession period for projects with lower than target traffic is not linked to revenue but to traffic counts, stressed projects will benefit from the concession agreement that provide a reprieve to under-performing assets.
- Better valuation and smoother closure for M&A deals – With largely digital revenue collection and the availability of reliable traffic data, it is expected Mergers & Acquisition transaction closure timelines to reduce, and potential disconnects between the buyer’s and seller’s views on base traffic will be eliminated. Problems such as incorrect classification of projects and violations maybe eliminated in the short term.
Other benefits –
- FASTags will also improve value realisation for the operations, management and tolling and toll, operate, transfer projects that NHAI would award in the future. Similarly, collections related to overloading penalty are also expected to become streamlined and accurate.
- These benefits are in addition to the significant boost to businesses in the form of improved logistics such as improved truck turnarounds and higher fuel efficiency.
- Resistance from urban consumers to paying tolls, primarily because of long queues at toll plazas, is also addressed with FASTags.
Way forward –
These benefits will accrue only if the implementation is carried out smoothly. Some areas will need further work. These include FASTag-related working capital schemes for truck users, customised solutions for toll plazas with additional vehicle toll categories, and further refining the solution through GPS-based tolling.
Source – Livemint
QUESTION – The Ministry of Transport and Highways has streamlined the toll collection requirements by digitising the process through ‘FASTags’. Examine the benefits of the technology for the government as well as the user.