Transforming the Toll Payment Infrastructure in India

India's booming roads and cars are paving the way for smart traffic management. With its road network and automotive industry rapidly expanding, India is embracing intelligent transportation systems (ITS), including high-tech solutions like toll management, highway traffic monitoring and integrated systems managing urban public transport. This blog explores the changing world of tolling, specifically the innovative Indian Tolling System.

Evolution of tolling in India

The tolling sector in India plays a crucial role in maintaining and expanding vast road networks, meeting the escalating transportation demands. With an extensive network comprising national and state highways, expressways and bridges, toll collection is a pivotal revenue source for development and maintenance of the road network. India's National Highways are pivotal in advancing the nation's economic and social development by ensuring seamless movement of goods and people, thereby enhancing market accessibility. As of December 2023, the total length of National Highways in India reached 146,145 kilometres, marking an impressive growth of approximately 60% over the past decade. This expansion has positioned India as the second-largest road network globally.

The tolling industry traditionally operated through manual toll booths, lacking advanced technology and support subsystems. This led to prolonged transaction times, opportunities for evasion, challenges in cash management resulting in bottlenecks and increased highway idle time, reducing service quality. The transformation of tolling in India began in 2010 with establishing of the Ministry of Road Transport and Highways of India (MoRTH) committee, chaired by Mr. Nandan Nilekani. The committee aimed to develop a unified electronic toll collection technology for national highways, ensuring interoperability and nationwide implementation. Recommendations from the committee included centralized debit/credit mechanisms, affordable sticker tags, Radio Frequency Identification (RFID)-based Electronic Product Code (EPC) and avenues for tag holders' inquiries via web, email and mobile.

Source: NPCI Report

The Indian Highways Management Company Limited (IHMCL) was formed in 2012, through a partnership between National Highways Authority of India (NHAI) and its Concessionaires and Financial Institutions, to achieve electronic tolling objectives and associated initiatives. A closed-loop Electronic Toll Collection (ETC) system was implemented between Mumbai and Ahmedabad in 2013, involving three logistics providers and approximately six toll plazas.

In 2016, IHMCL collaborated with the National Payments Corporation of India (NPCI) to develop an interoperable solution for the FASTag Program. NPCI initiated the National ETC (NETC) platform to create a centralised clearing point for toll transactions, ensuring compatibility across systems. Before this, although some closed-loop systems existed in specific areas, no standardised national-level solution existed. The introduction of the NETC FASTag system transformed toll collection, offering road users and toll authorities a more convenient, scalable, interoperable, and efficient tolling experience. This system involves multiple partners within the ecosystem. Over the years, toll payment methods evolved from traditional cash-based systems to prepaid cards, debit cards, and payment wallets. UPI and BPPS-based recharge methods emerged as key facilitators in maintaining sufficient balance in the NETC FASTag ecosystem, ensuring a smooth payment experience.

Digitization of toll payments in India

The NETC initiative is designed to cater to India's electronic tolling requirements by offering a nationwide toll payment solution that is interoperable, incorporating clearinghouse services for settlement and dispute resolution. FASTag is an ETC system used in India. It uses RFID technology to allow toll payments directly from the associated prepaid or savings account while the vehicle is in motion. FASTag (RFID Tag) is attached to the windshield of the vehicle, allowing uninterrupted passage through toll plazas without the need to stop for transactions. FASTag provides the convenience of cashless payment, easy recharge and helps save fuel and time.

Understanding Electronic Toll Collection

ETC functions by identifying if vehicles passing through toll collection points are enrolled in the program, notifying enforcers of those that are not, and automatically debiting the accounts of registered vehicles without necessitating them to halt. When a vehicle enrols in an ETC program, it is equipped with an on-board unit containing specific vehicle details. Road-side units located at toll collection points communicate with the on-board units to retrieve vehicle information, which is subsequently utilized to handle toll transactions.

Need for interoperable ETC

In a country like India, where road stretches are managed and tolled by various agencies and authorities, envision a scenario where different toll collection entities adopt separate standards and technologies for ETC, each operating independently without integration with ETC programs of other toll collection agencies. Consequently, a vehicle enrolled in the ETC program of one toll operator would be unable to access ETC services offered by other toll operators using the same ETC account, leading to a lack of interoperability. Without interoperable ETC, road users would need to register with multiple ETC programs and purchase multiple On-Board Units.

Interoperable ETC provides the convenience of electronically paying tolls at any toll collection point using a single ETC account and On-Board Unit. Achieving interoperable ETC necessitates (a) adopting similar technologies and standards for ETC to ensure that the same On-Board Unit is accepted at all toll collection points and (b) establishing a mechanism for debiting the appropriate toll fee from the account of the registered vehicle and crediting it to the respective toll collection agency.

Governments and toll collection agencies worldwide are striving to achieve interoperable ETC. Fortunately, in India, there are no legacy systems, unlike in other developed countries; ETC is currently operational at only a few toll plazas in standalone mode. This presents a distinct advantage in selecting a simple and robust ETC technology that is scalable, reliable, cost-effective for road users and interoperable across the country.

ETC benefits:

NETC FASTag transaction process flow

The diagram provided below depicts the transaction flow of the NETC system. The transaction from the toll plaza is forwarded to the acquiring system, where it undergoes validation. Subsequently, the validated transactions are transmitted to the NETC Switch. NPCI then routes these transactions to the corresponding Issuer Bank, which debits the account of the tag holder.

Source: NETC

Toll payments landscape market size in India

The NETC FASTag toll collection system has achieved notable success in India and continues to grow steadily. Revenue has significantly surged, from US$ 403 million (Rs. 3,352 crores) in FY18 to US$ 6.5 billion (Rs. 54,144 crores) in FY23. By December 2023, revenue for FY24 had already reached US$ 5.7 billion (Rs. 47,730 crores), underscoring the widespread acceptance and adoption of tolling systems across national highways. This growth contributes to the nation's economic advancement and infrastructure development.

Source: NPCI

Source: NPCI

The NETC platform integrated thirty-eight banks, enhancing user experience by offering more choices at NH Fee Plazas. Since the Government mandated FASTag in February 2021, the number of toll plazas participating in the FASTag program rose from 770 to 1,228, including 339 state toll plazas. With over 6.9 crore FASTag issued to users and a penetration rate of about 97%, the system significantly improved user experience by cutting down on wait times at NH Fee Plazas. The steady and advancing adoption of FASTag by highway users has boosted the efficiency of toll operations and resulted in a more accurate assessment of road assets, attracting increased investment in India's highway infrastructure. In addition to efficiency in toll collection, FASTag enabled convenient and secure contactless payment for parking fees at over 140 parking facilities in more than fifty cities across India.

Looking ahead

The Government remains resolute in its dedication to offering a smooth and convenient tolling experience for all road users. In pursuit of this goal, NHAI is actively completing the essential prerequisites for deploying a Global Navigation Satellite System (GNSS) based tolling system, enabling a seamless free-flow tolling system across India. Mr. Nitin Gadkari, the Minister for Road Transport and Highways, has disclosed plans for the upcoming launch of satellite-based tolling systems on India's national highways. The NHAI plans to commence the implementation of this new system by March 2024, as disclosed by the Minister during a session in the Rajya Sabha. The initiative aims to alleviate traffic congestion and levy motorists for the precise distance travelled on the highways. The Minister provided additional details, stating that his ministry conducted two pilot initiatives involving automatic number plate recognition systems, specifically automatic number plate reader cameras to facilitate automated toll collection without vehicle stops. India recently informed the World Bank of its efforts to reduce waiting times at toll plazas and streamline export release procedures at land ports. The implementation of FASTag significantly decreased the average waiting duration at toll plazas to just 47 seconds, representing a remarkable improvement from the previous average of 714 seconds.