Why Highways Keep Charging Toll Forever?

There is a peculiar kind of nostalgia that attaches to bad roads. Anyone who drove the Delhi-Agra highway in the 1990s remembers the potholes, the detours around broken bridges, the hours that should have been minutes. Then, somewhere between 2014 and today, something changed. India built expressways. Six-lane, median-divided, signage-lit corridors that cut journey times in half. Flyovers over flyovers. Rest areas with restaurants. The kind of infrastructure that used to feel like it belonged to another country.

But along with world-class roads came world-class toll plazas, and a growing public bewilderment about why the tolls never seem to end. Roads that have been “recovered” for years still charge. Highways you cross for three kilometres charge you for sixty. And the receipts, when they come, arrive from private companies, not from the government that built the road with your tax money.

To understand why, you need to understand the financial machine that built modern India’s highways, and why, by the logic of that machine, the toll can almost never stop.

Why Do We Pay Toll When We Already Pay Road Tax?

The first and most common objection to toll roads is the one that gets asked most often: didn’t we already pay for this with our taxes?

The answer requires a distinction that is economically important even if it feels like sophistry. Road tax, the one-time levy paid to the state government when you register a vehicle, goes into the state’s general revenue pool. It funds state roads, municipal infrastructure, and countless other priorities. It is not ring-fenced for national highways, and it is collected regardless of whether you ever drive on a national highway.

Toll tax is something different: a user fee for a specific piece of infrastructure. The user-pays principle behind it says that the people who directly benefit from an expensive piece of road infrastructure, who save time, fuel, and vehicle wear, should pay for it, rather than spreading the cost across all taxpayers, including those who never use it. There is economic logic to this. It also allows infrastructure to be financed through private capital, which the government does not have to find upfront.

The practical translation: India’s government cannot build roads fast enough using only budget allocations. Building 14,000+ km of highway a year, as India has averaged since 2021, requires trillions of rupees in financing. Much of that financing comes from debt. And that debt has to be repaid from somewhere. The somewhere is you, at the toll plaza, for the next 20 to 30 years.

NHAI’s ₹3.42 Lakh Crore Debt

Between 2014 and 2025, India’s national highway network expanded from roughly 91,000 km to more than 1,46,000 km. This is one of the most ambitious infrastructure programmes undertaken by any government, anywhere, in the modern era. It required an enormous volume of capital, capital that the government did not have and did not raise through taxes.

The National Highways Authority of India (NHAI) filled this gap by borrowing. It borrowed from banks, from bond markets, from the National Small Savings Fund, and from multilateral lenders. The borrowing accelerated dramatically through the mid-to-late 2010s as the highway construction targets rose. By FY 2021-22, NHAI’s debt had peaked at approximately ₹3.5 lakh crore.

This debt does not sit quietly on a balance sheet. It accrues interest. At peak borrowing, NHAI was spending more on interest payments than it was collecting in toll revenue, a situation with obvious long-term unsustainability. The agency’s total financial liabilities at one point were over twelve times its annual internal accruals from toll collections.

The picture has improved since then. NHAI stopped taking on new borrowing in FY 2023-24. It has prepaid over ₹86,000 crore in obligations, including ₹50,000 crore in high-cost National Small Savings Fund loans. Toll revenues have grown at approximately 10% annually, reaching around ₹52,000–55,000 crore as of 2024-25. Through InvIT (Infrastructure Investment Trust) monetisation, NHAI raised ₹15,700 crore in FY 2023-24 and plans to raise ₹15,000–20,000 crore more in FY 2024-25. Total debt has declined to approximately ₹2.36 lakh crore, a 32% reduction from the peak, with a target of below ₹2 lakh crore by end of FY 2025-26.

This is progress. But ₹2 lakh crore is still a vast obligation, and servicing it, even at reduced interest rates of 7.58–7.59% after NHAI’s renegotiations, costs approximately ₹15,000 crore per year in interest alone. That cost is factored into every toll rate on every highway NHAI operates. The tolls are not just recovering construction costs. They are also paying off the interest on the loans that financed the construction. This is why even on a road that has been operating for fifteen years, the toll continues.

Asset Monetisation

One of NHAI’s primary tools for reducing its debt burden without raising toll rates is asset monetisation, essentially, selling the future toll revenue of already-built highways to investors in exchange for an upfront lump sum today.

The two primary instruments are Toll-Operate-Transfer (TOT) concessions and Infrastructure Investment Trusts (InvITs). Under TOT, private operators pay an upfront fee to NHAI for the right to collect tolls on a completed, operational stretch of highway for a fixed period, typically 30 years. NHAI takes the money, pays down its debt, and the private operator recoups its investment by collecting tolls over the concession period. Under InvITs, highway assets are pooled and listed as tradeable financial instruments, allowing institutional and retail investors to buy exposure to toll revenue cash flows.

The NHAI Asset Monetisation Strategy 2025 targets the monetisation of 24 road assets covering 1,472 km in FY 2025-26, with projected proceeds of ₹30,000–40,000 crore. Cumulative monetisation through InvIT and TOT may approach ₹1.3 lakh crore over the medium term, according to industry estimates.

The logic is sound: NHAI has capital locked in completed roads that are already generating steady toll revenue. Unlocking that capital and deploying it into new construction is more efficient than continued borrowing. But the consequence for road users is important to understand: even after a highway’s construction cost has been “recovered” through initial tolling, the road may be transferred to a private operator under a TOT or InvIT who then continues to collect tolls for 30 more years, not to pay for construction, but to provide a return to investors who bought the right to those cash flows.

The toll, in other words, does not stop when the road is paid off. It continues because the asset has been sold to someone who needs to recover their investment.

The Road Not to Take

Before examining how India’s financing model works in detail, it is worth pausing on a cautionary tale from across the border, one that India’s policymakers have been watching carefully.

China’s infrastructure build-out since the 1990s has been staggering in scale. Roads, railways, airports, metro systems, bridges, China constructed more infrastructure in three decades than most of the world had built in a century. The mechanism that funded much of this was Local Government Financing Vehicles, known as LGFVs.

LGFVs were companies created by China’s local governments to borrow on their behalf. Since Chinese law prevented local governments from taking on debt directly before 2015, LGFVs became the workaround, borrowing from banks and bond markets using land owned by the government as collateral, then deploying capital into infrastructure projects. They were, in effect, government borrowing disguised as corporate borrowing. Lenders treated the debt as quasi-sovereign because of the implicit government guarantee.

The problem was that many of the projects LGFVs funded did not generate enough revenue to service the debt. Roads in Guizhou province with negligible traffic. Airports that serve cities too small to generate meaningful passenger volumes. Industrial parks built ahead of any demand. The debt accumulated, the land values that collateralised it collapsed when China’s real estate bubble burst in 2021, and the LGFVs were left holding assets that could not repay their obligations.

By the end of 2023, the IMF estimated total LGFV debt at approximately $8 trillion, around 47% of China’s GDP. A single province, Guizhou, had accumulated debt equivalent to nearly three-quarters of its annual GDP. China is now attempting a massive debt restructuring, planning to issue ¥10 trillion ($1.4 trillion) in government bonds between 2024 and 2028 to replace hidden LGFV liabilities. Even after this, analysts say Beijing is merely “extending and pretending”, deferring, rather than resolving, the underlying problem. Andrew Collier, founder of Orient Capital Research, has argued that LGFVs are likely to be “the cause of the next financial crisis in China.”

The India parallel is imperfect but instructive. India’s NHAI, like China’s LGFVs, built infrastructure at a pace that outran its capacity to service the resulting debt from revenues alone. The difference is that NHAI is transparent, its debt is on its balance sheet, auditable, and governed by regulatory oversight. The risk India faces is not LGFV-style hidden debt, but the more prosaic problem of committed fiscal obligations constraining future flexibility and pushing toll burdens onto road users for decades.

The “Never-Ending” Toll and BOT Contracts

The BOT model (Build, Operate, Transfer) is the mechanism behind India’s private highway concessions. A developer finances and builds a road, then collects tolls over a concession period (typically 20 to 30 years) to recover its investment plus a return. At the end of the concession, the road transfers back to NHAI.

In theory, the toll stops when the concession ends, or when traffic has grown enough that revenues have exceeded the contracted threshold. In practice, several things make the toll feel permanent.

First, concession periods are long by design. The construction cost of a significant highway corridor might be ₹3,000–5,000 crore. Recovering this through tolls, which are capped by regulation and revised only annually, requires decades. Concessions of 20–30 years are not unusual; on complex or high-investment projects, they can be longer.

Second, BOT concession agreements typically include provisions that protect the developer from revenue shortfalls. If actual traffic falls below projected levels, as it frequently did in the early 2010s, when traffic on newly opened corridors ran 30–50% below projections, the concession period is extended proportionally. Less traffic means a longer concession. A road that was supposed to stop charging in 2030 might now charge until 2040.

Third, when an existing BOT concession expires, NHAI often monetises the asset through TOT, selling it to a new operator who immediately begins another 30-year tolling period. The road user never notices the ownership change. The toll continues without interruption.

Fourth, even on highways operated directly by NHAI (rather than through private BOT concessions), tolls are necessary to service NHAI’s own debt. As long as NHAI carries ₹2 lakh crore in debt obligations, it cannot afford to make its roads toll-free.

The 20% Guaranteed Return Case

The BOT model’s treatment of traffic risk has been one of its most controversial features. Early BOT contracts in India were structured on traffic projections that proved dramatically optimistic. When actual volumes fell short, developers who had committed private capital to projects found themselves unable to service their debt.

The government’s response, ultimately, was the Hybrid Annuity Model (HAM), introduced around 2016, under which the government makes fixed semi-annual payments to the developer regardless of traffic volume. The developer no longer bears traffic risk; the government does. This made new highway projects financeable and revived private sector participation.

But HAM created its own dynamic. Developers calibrated their bids knowing that government payments would arrive regardless of performance. G R Infraprojects stated plainly that if a developer cannot see a 15% return on investment from toll revenues, the project goes to HAM or does not get built. IRB Infrastructure’s concession structures include termination payments of up to 150% of equity and 100% of debt, provisions designed to guarantee minimum recovery for lenders even in a project failure scenario.

Some early BOT contracts were even more explicit about returns. Termination clauses and renegotiated terms effectively provided developers with a floor on their investment returns. The justification was that infrastructure projects are long-duration, capital-intensive, and subject to force majeure risks that are difficult to price. The concern raised by critics was that guaranteed returns effectively removed the discipline of market risk from infrastructure investment, creating a model where developers faced limited downside while road users bore the cost of the guaranteed upside.

The 60 Kilometre Rule

Under the National Highway Fee Rules, 2008, toll charges in India are based on a standard stretch length of approximately 60 kilometres. A toll plaza typically covers a stretch of 60 km, and whether a driver travels five kilometres or fifty-five on that stretch, they pay the same toll. The rule is designed to simplify administration, but its effect is that short-distance highway users massively overpay relative to their actual usage.

This also creates a perverse incentive in project design sometimes called “gold plating.” Under a BOT concession, the developer builds infrastructure and then recovers costs through tolls over a fixed period. The amount that can be recovered depends on the project cost approved at concession, higher approved costs mean more recovery headroom, potentially longer concession periods. This creates an incentive to maximise the approved project cost by adding scope, upgrading specifications, or including elements that are not strictly necessary for the road’s function. The developer’s equity and debt are sized against the project cost; a higher project cost (within limits) means more revenue recovery entitlement.

NHAI and MoRTH have introduced various mechanisms to counter gold plating: competitive bidding, independent technical audits, and penalties for cost inflation. But in a sector where projects routinely involve thousands of crores and specifications are complex, the incentives are difficult to entirely eliminate. Recent evidence of pavement failures, including a 2.7-km stretch on the Amritsar-Jamnagar corridor in June 2025, suggests that the quality discipline in highway construction remains imperfect even as the financial engineering is increasingly sophisticated.

FASTag’s Hidden Costs

When FASTag was made mandatory for all four-wheeled vehicles in February 2021, it represented a genuine improvement in the tolling experience. RFID-based electronic deduction eliminated the need to stop completely, reduced queues, and cut the fuel wastage and time loss associated with physical cash transactions. A 2018 study by the Transport Corporation of India and IIM Calcutta had estimated the annual economic cost of delays and fuel wastage at toll plazas at ₹1.5 lakh crore — equivalent to 1% of GDP at the time. FASTag addressed a real problem.

But FASTag also created its own frustrations. The technology was not flawless: tags sometimes failed to scan, resulting in double charges, disputed deductions, and queues at the hybrid lanes for drivers without functioning tags. Inactive or blacklisted tags caught drivers unaware. The process of disputing an incorrect deduction was cumbersome. And the fixed-length tolling model: paying for 60 km even if you travel 5 km felt inequitable to many users, particularly those who frequently used short highway stretches near toll plazas.

FASTag did, however, deliver significant revenue gains for NHAI. Electronic tolling is harder to evade than cash. Disputed exemptions and fraudulent passes that used to drain toll revenue became easier to detect and control. Daily FASTag collections, once erratic, became far more predictable and auditable.

The FASTag infrastructure also created the data backbone on which the next generation of tolling, satellite-based GNSS, will eventually be built.

The Future of Tolling

The direction India’s tolling system is moving is clear, even if the timeline remains uncertain. The goal is to replace fixed-location toll plazas with satellite-based distance charging, where every vehicle is equipped with an On-Board Unit (OBU) that tracks highway usage and automatically deducts tolls based on the exact kilometres driven.

Union Minister Nitin Gadkari has repeatedly announced versions of this plan, most recently in April 2025, when he signalled that a new toll policy was imminent. The Ministry of Road Transport and Highways subsequently clarified that no nationwide GNSS implementation was happening from May 1, 2025, the confusion reflecting the gap between ministerial ambition and the complexity of actual implementation. The current approach is a hybrid: ANPR (Automatic Number Plate Recognition) cameras combined with existing FASTag infrastructure at select toll plazas, creating a “barrier-less” tolling experience at chosen locations while full GNSS awaits the infrastructure build-out.

When GNSS does arrive, it promises genuine improvements. Distance-based charging means paying for only the kilometres actually driven, eliminating the inequity of the 60-km flat slab. Dynamic pricing becomes possible: peak congestion hours could attract higher rates, incentivising off-peak travel and improving throughput. Revenue leakage from tag misuse would be significantly reduced. India would join Germany, Slovakia, Switzerland, Hungary, and several other European countries that already use GNSS for heavy vehicles on motorways.

The technology will use India’s own NavIC satellite navigation system, developed by ISRO, alongside GNSS signals, a strategic choice that reduces dependence on GPS infrastructure controlled by other countries.

Privacy Concerns and the Surveillance Question

The GNSS model comes with a cost that extends beyond money: the permanent real-time tracking of every vehicle on every national highway.

Under the current FASTag system, NHAI knows that vehicle X passed through toll plaza Y at time Z. Under a GNSS system, NHAI will know the precise route taken by every vehicle, at every moment, on every national highway in the country. This is a qualitatively different level of surveillance data, data that reveals not just toll compliance but travel patterns, business activity, personal movements, and associations.

European countries that have implemented GNSS tolling have done so within frameworks of data protection law, independent regulatory oversight, and legally enforceable constraints on how location data can be used, shared, or retained. India’s equivalent legal framework, the Digital Personal Data Protection Act, passed in 2023, is still developing its implementing rules. The Act’s enforcement mechanisms are untested and its scope of data minimisation requirements unclear.

The concern is not hypothetical. India is a country with a history of using surveillance data in ways that civil liberties advocates have contested. A database of every vehicle’s precise highway movements, held by a government authority, is a powerful surveillance instrument. Its protection from misuse depends entirely on the legal and institutional frameworks that govern it, frameworks that do not yet fully exist.

When Gadkari says the new system will know “if you take a bypass, a flyover, or an expressway” and charge accordingly, he is describing a technically elegant and economically efficient tolling model. He is also describing a state that will know, with precision, where every vehicle in India is, every time it drives on a national highway.

The Honest Trade-Off

India’s highway build-out has been transformative. The logistics cost reductions, the travel time savings, the regional integration, the GDP contribution of better connectivity, these are real and substantial. Highways that took nine hours in the 1990s take three today. Supply chains that were inefficient have become competitive. Cities that were economically isolated have been connected.

The tolls that fund this transformation are not a scam. They are the price of a model that built infrastructure faster than general taxation could have financed it. NHAI’s debt, while large, is transparent and declining. The BOT and HAM models, despite their imperfections, attracted private capital into a sector where it was desperately needed.

But the road user is entitled to ask harder questions. Why does the 60-km flat toll persist when distance-based charging is technically available? Why are concession extensions automatic when traffic projections miss, but there is no corresponding reduction when a road earns more than projected? Why does monetisation lock future users into 30-year tolling obligations without a sunset on recovery? Why does a GNSS system with no legal privacy framework get discussed as a future certainty while the data protection architecture remains incomplete?

India is, by a significant margin, one of the most ambitious highway builders in the world right now. That ambition deserves matching ambition in transparency: project-level cost and revenue data published openly, concession terms explained in language that citizens can understand, GNSS implementation paired with enforceable data protection, and a credible public commitment to what toll-free eventually looks like, if it ever does.

The nostalgia for bad old roads is misplaced. The expressways are worth having. But the financial architecture behind them warrants more public scrutiny than it currently receives, because the commuter paying at the plaza is not just a user of a service. They are the primary financier of one of the largest infrastructure programmes in Indian history.