New Delhi: The inflation-linked toll increase in FY24 should be a relatively modest 2-5% in FY24, as against 8.7-14.6% in FY23, ICRA said on Monday. The rating agency has revised the outlook on the toll road sector to stable. Positive for FY24.
“In the backdrop of WPI inflation easing to 4.95% in December 2022 and expected WPI inflation of sub-2% in March 2023, the inflation-linked toll increase to be relatively modest at 2-5% in FY2024 as compared to 8.7- Needed 14.6% toll rate hike in FY23, the rating agency said in a report.
The change in outlook primarily reflects the expected moderation in toll collection growth to 6-9% in FY2024 as compared to a robust growth of 17-20% in FY2023.
The strong growth in toll collections in FY2023 was driven by a healthy toll rate hike on the back of higher inflation as well as improved economic activity.
“Traffic volume has a strong correlation with the gross value added (GVA) of construction, mining and manufacturing (CMM), as around 65% of freight traffic is dependent on these sectors. The growth in CMM for FY2024 is estimated to be 5-7% and overall traffic volume is expected to grow by 4-5%,” the ICRA report said.
“The December WPI linked projects will see a 5 per cent increase in toll rates, while the March WPI linked projects will see a sub-2 per cent increase in toll rates. Consequently, toll collections are estimated to grow by 6-9 per cent in FY2024, mainly supported by 4 per cent-5 per cent growth in traffic,” said Vinay Kumar G, Sector Head, Corporate Ratings.
He added that despite moderation in toll collection growth, lower outflows for O&M and major maintenance expenditure due to the recent moderation in key commodity prices, especially bitumen and steel, support the debt coverage metrics for BOT toll road assets. Needed
Commenting on the recent budget, he said, “The gross budgetary support to the Ministry of Roads has been increased by a remarkable 25%. From Rs 2.59 trillion in FY2024 BE to RE 2.06 trillion in FY2023 under the Bharatmala and National Infrastructure Pipeline (NIPPL) To meet the targets of completion of NIP).
This should support the enhanced road performance target of 14,500 km as against 12,000 km in FY2023. However, the budget remained silent on the target of giving awards for FY2024, given the slow pace of awards expected for the fourth quarter of FY2024, with general elections scheduled for May 2024. He said that 350 billion appears ambitious despite the strong appetite for operational road assets.
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