ICRA Tips 7–9% Highway Toll Growth Despite Construction Slowdown

Highway toll collections across India's national highway network are on track for growth of 7–9% in FY2025-26, moderating to 6–8% in FY2026-27, credit ratings agency ICRA said on Wednesday, citing improving traffic volumes and inflation-linked toll rate adjustments as the primary growth drivers.

Traffic growth of 4–5% is expected to underpin revenue performance in the current fiscal year, a marked improvement over the 2.5% recorded in FY2024-25. However, toll rate hikes are likely to remain subdued in FY2026-27, with newer projects linked to December Wholesale Price Index (WPI) seeing increases of around 3.3%, while older projects linked to March WPI are expected to see hikes in the 2.5–3.0% range, reflecting soft inflation conditions.

Suprio Banerjee, Co-Group Head of Corporate Ratings at ICRA, noted that muted rate hikes would weigh on FY2026-27 collections, though buoyant economic activity should sustain traffic momentum. He also indicated that concerns around the annual FASTag pass scheme have had a limited impact on collections, with most developers now receiving weekly payouts from highway authorities, resolving earlier operational disruptions.

The positive revenue outlook comes against a backdrop of slowing road construction. ICRA expects MoRTH road execution to fall to 9,500–10,000 km in FY2025-26, down from 10,660 km in FY2024-25, declining further to 9,000–9,500 km in FY2026-27. Project awards are projected at 7,250–7,750 km in FY2025-26, broadly in line with the 7,538 km awarded the previous year but well below the levels seen between FY2020-21 and FY2022-23.

ICRA attributed the construction slowdown to a shrinking developer order book and disruptions caused by an early onset and elongated monsoon season. The agency noted a typical lag of six to nine months between project awarding and on-ground execution, suggesting that the pipeline slowdown will continue to constrain near-term activity. Nevertheless, the growing emphasis on expressways and high-speed corridors is expected to deliver relatively stronger growth in lane-kilometre expansion compared to overall construction volumes.