Toll roads to get higher credit rating rates

MUMBAI: At a time when a stubbornly high inflation is giving sleepless nights to government, RBI and policymakers, making deeper holes into everyone's pockets, it has a positive impact on one sector - tolled roads according to leading research and rating agency Crisil which says the price rise increases the credit quality of such motorways.

According to a Crisil Ratings' report on toll roads which analyses the impact of the high inflationary environment on revenues of the 21 operational toll roads, their cumulative toll revenue stood at around Rs 1,000 crore last fiscal and says the same will grow by 20 percent this fiscal, while road traffic is slated to login in a 10 percent growth.

"Crisil believes that revenues for these toll road projects will grow by 20 percent this fiscal. This growth will be contributed almost equally by revisions in toll rates and an expected rise in traffic volumes based on our estimates of nearly 8 percent GDP growth," Crisil Ratings director Pawan Agrawal said in the report.

Inflation has been remaining unacceptably high since last year and is again reached closer to the dreaded double-digit level in May when it rose to 9.06 percent (up from 8.66 percent in April), while food inflation after a brief pose is looking up again with the latest number standing at 9.13 percent for the week ended June 11.

Adding more fuel to fire was the last Friday's steep hike in diesel, kerosene and cooking gas prices, which would put immense pressure on headline and food inflation numbers.

As inflation remained highly above the comfort level of RBI, since March last year, it has upped its key rates ten times in a row, with the latest round being on its mid-quarter review on June 16, when it jacked up the short-term lending and borrowing rates by 25 basis points each to 7.5 and 6.5 percent respectively.

Citing the reason for this projection, Agarwal says, "the revenues of operational toll-road projects stand to benefit from the prevailing high-inflationary environment, given that revisions in toll rates are linked to the movements in inflation indices, and traffic growth is relatively inelastic."