NHAI's Revised WPI Factor to Reduce Toll Road Returns by 100 Basis Points

A recent policy amendment by the National Highways Authority of India (NHAI) regarding the wholesale price index linking factor is expected to reduce equity returns for toll-based highway projects by approximately 100 basis points, according to an analysis by Crisil Ratings.

The revision affects how toll rates are calculated across national highway projects. NHAI's circular dated September 13, 2025, reduces the WPI linking factor from 1.641 to 1.561 for converting the wholesale price index from the 2004-05 series to the 2011-12 series. This technical adjustment will translate into a 3-5% reduction in base toll rates for national highway concessions.

Crisil Ratings evaluated 64 toll roads with combined investments totaling Rs 95,000 crore as of March 31, 2025. The analysis indicates that toll collections could see a 3.0-3.5% impact over the remaining concession period compared to previous projections.

"The change in base means that collections of toll road operators, which are a function of toll rate and traffic growth, will take a permanent hit," said Anand Kulkarni, Director at Crisil Ratings. The assessment assumes no compensation for the policy change.

Despite the impact on equity returns, credit risk profiles for most rated assets are expected to remain stable. Average debt service coverage ratios are projected to decline by only 0.05-0.10 times over the remaining debt tenure.

"The impact will be cushioned by the fact that many toll road assets are housed under infrastructure investment trusts and benefit from pooling of cash flows and diversification with presence of annuity assets," explained Saina S Kathawala, Associate Director at Crisil Ratings.

The sector has experienced substantial growth in recent years, with total outstanding investments increasing from Rs 0.5 lakh crore in March 2021 to Rs 2 lakh crore by March 2025. This growth reflects strong equity inflows and healthy operating performance.

However, the industry has faced several policy changes recently, including delayed toll rate hikes due to general elections and the implementation of FASTag annual passes for private vehicles in August 2025. While these changes are expected to be adequately compensated, they contribute to uncertainty in assessing revenue risk over lengthy concession periods.

The matter is currently under judicial review, with the Delhi High Court directing NHAI not to take coercive action against concessionaires pending a hearing scheduled for October 17, 2025.

Crisil Ratings emphasized that maintaining stakeholder confidence through a consultative approach will be crucial for the success of the government's asset monetization plans and the sustainability of credit profiles in the toll road sector.