Percolating economic impact of the West Asia conflict and a consequent deceleration in commercial traffic is likely to moderate growth in toll collection by 150-200 basis points (bps) on-year this fiscal.

The marginal underperformance is temporary and is likely to be recouped next fiscal, due to relatively higher toll rate hikes¹ compelled by inflationary pressures. To be sure, toll rate hike in a fiscal year is based on the Wholesale Price Index (WPI) inflation of the previous year. This underscores the resilience of toll road assets through economic cycles. Healthy operating performance and controlled leverage should keep credit profiles of toll road operators stable.

A study of 91 toll road assets, covering ~10,000 km and ~60% of privately operated concessions, indicates as much.

Says Manish Gupta, Deputy Chief Ratings Officer, Crisil Ratings, “Traffic growth, a function of economic expansion, is estimated at 2-4% in the near term. A modest WPI inflation of last year will limit toll rate hikes this fiscal and consequently, toll collection will grow 5-7%. However, next fiscal toll rates may see a steeper increase due to higher WPI inflation, expected this fiscal amid the West Asia conflict. This will drive toll collection growth to 8-10% next fiscal.”

There are unique drivers for commercial and passenger traffic.

Commercial traffic remains the backbone of toll collection, typically contributing ~75%. Freight movement is closely linked to industrial output, construction activity and mining, which may be impacted amid the West Asia conflict – as reflected in sequential degrowth in fastag toll collections² in March and April.

Passenger traffic, on its part, continues to benefit from rising vehicle ownership, better connectivity and time savings enabled by improved road infrastructure. While the contribution of passenger traffic to overall toll collection is lower, it has outpaced commercial traffic in growth over the past few years. Improved road quality and expressway connectivity are likely to support this trend going forward as well. Moreover, this segment is less affected by geopolitical events.

While the overall road traffic growth remains steady, around one-fourth of the assets from Crisil Ratings sample saw a decline in traffic over the last two fiscals. Diversion to new highways and expressways was a key reason for the decline, affecting ~12% of the assets. Other factors such as heavy monsoons, sand mining ban, normalisation following a temporary traffic surge, and feeder route issues impacted another ~12% of the assets.

Says Anand Kulkarni, Director, Crisil Ratings, “Notably, more than 80% of the assets from Crisil Ratings sample are a part of infrastructure investment trusts (InvITs) or pooled portfolios. Consequently, diversity of assets helps cushion the impact. Controlled leverage maintained under the InvIT structure, along with resilient operating performance, will keep the debt service coverage ratio of toll road assets strong at ~1.5 times this fiscal and the next. Consequently, credit profiles will remain stable.”

While policy interventions have occasionally influenced toll collection, their overall impact has been manageable. For instance, the introduction of an annual pass for non-commercial passenger vehicles (effective August 15, 2025) resulted in a 5–7% impact on overall toll collection in the last quarter of fiscal 2026. However, the impact is being compensated by the authority to concessionaires, thereby preserving credit stability.

Significant weakening in the macroeconomic environment amid the West Asia conflict, particularly affecting commercial traffic, will warrant close monitoring.

¹ For projects awarded post 2008, the toll rate hike is applicable at 3% fixed hike plus 40% WPI. For projects awarded prior to 2008, the toll rate hike is 100% linked with WPI.
² Based on like-for-like data from Indian Highways Management Company Limited (IHMCL) for over 900 toll plazas.