New Delhi Banks have asked the National Highways Authority of India (NHAI) to go back on the higher FASTag project management fee (PMF) to ensure its viability for the issuing bank.
In a set of recommendations sent to the Ministry of Road Transport and Highways (MoRTH) and NHAI by the Indian Banks’ Association (IBA) and by several private and public sector banks individually, the banks have asked the highways authority to back the highways authority. To make the operation of FASTag service sustainable, first interchange PMF of 1.50%.
Banks also want the high PMF to continue for at least two more years till March 31, 2024.
The government has launched a mandatory FASTag program at the national level under which all toll collection on highways has now been automated.
Toll is automatically collected from an individual’s accounts with the participating banks which issue FASTag whenever a vehicle crosses the toll plaza on the highways. More than 95% of highway toll is collected through FASTag.
According to two people aware of the development, in their representations to the Road Ministry and NHAI, banks have said that reducing the interchange fee from 1.5% to 1% will reduce the income from NETC FASTag business by 31%, which will affect the banks. for the feasibility of the project. NHAI had reduced the PMF to 1% with effect from April 1, 2022.
“Banks and National Payments Corporation of India (NPCI) are demanding increase in PMF to protect margins. We are in talks with them to find a solution and some work should be done soon,” Giridhar Armane, secretary, MoRTH, said in a phone interview.
He said, however, that although banks have been seeking amendments to the PMF, they had earlier participated and bid aggressively, citing low charges for obtaining FASTag contracts.
“The competition among FASTag providers is such that only interested operators will be in service. Still, we’ll see which is the best option available in this case,” Armane said.
Queries sent to IBA, NHAI, Ministry of Finance and Secretary-Department of Financial Services remained unanswered till press time.
HDFC Bank and ICICI Bank also did not respond to queries.
FASTag is one of the ambitious and most successful programs of the Ministry of Roads, which has transformed the way highway toll collection is done across the country by simplifying the entire process.
For banks, provision of FASTag as participating and issuing bank is also a good business considering the scale of operations. In FY23, the government intends to collect more 40,000 crore as toll revenue and almost the entire amount is expected to be collected using FASTag.
Recent data from the Ministry of Roads showed that FASTag penetration has increased from around 16% in FY18 to around 96% in FY22. The total toll collected in FY18 was 22,000 crore including a single 3,500 through FASTag. In FY22, while the total toll collection was 34,500 crore, toll collected through FASTags rises sharply to . exceeded 33,000 crores.
The Road Ministry has made the use of FASTag mandatory for toll payment on National Highways from midnight of 15 February 2021. Therefore, any vehicle that passes through the highways without a FASTag is penalized through payment of double the normal road user fee at the toll gates.
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