ISLAMABAD: A new report of the Asian Development Bank (ADB) on road funds and user charges claims that toll rates in Pakistan are relatively low and increase in toll rates is not considered a viable option because toll roads have relatively low usage in the country, and it is expected that the users will opt to use non-tolled highways.

The National Highway Authority (NHA) is now looking at increasing its revenue from the use of right-of-way highways, but this is unlikely to provide the necessary levels of revenue and additional sources will need to be identified.

In 2009, the NHA issued standard operating procedures (SOPs) for leasing of the right-of-way that aim to commercialise the right-of-way and develop it as an important source of income for the road maintenance account (RMA).

The ADB report was developed as part of the support of the Central Asia Regional Economic Cooperation (CAREC) programme towards the establishment of competitive transport corridors, facilitation of movement of people and goods, and provision of sustainable, safe and user-friendly transport and trade networks.

The report covers Azerbaijan, Kyrgyz Republic, Mongolia, Pakistan, and Uzbekistan.

Bank’s report says more roads needed to be tolled to increase revenue

Titled ‘Roads Funds and Road User Charges in the CAREC Region’, the report released on Saturday said the road maintenance account (RMA) revenue growth has not been able to keep up with demand.

Where the RMA revenue was able to cover over 70pc of needs at the time of establishment, coverage gradually decreased to 40 to 50pc in past years.

This is causing a considerable problem, with highways receiving insufficient maintenance and becoming subject to accelerated deterioration. The inclusion of some state highways under the responsibility of NHA led to the worsening of road conditions as reflected in the average roughness of the network.

Many of the poor highways have since been improved through capital investments financed outside of the RMA in a gradual improvement in network conditions.

The improved road conditions have also reduced the maintenance funding needs, although these remain nearly twice as high as the available funding from the RMA. Most high-volume highways and motorways have now been put under tolling and, although some additional road sections can still be tolled and provide additional revenue, this is very limited, report says.

The RMA is an off-budget road fund, where all revenues are collected by NHA and deposited directly into the RMA bank account. The revenues do not go through the federal budget and are not included in or approved as part of the annual budgeting system.

According to the CAREC report, in 2003-2004, the optimal funding needs were determined to be just under Rs7 billion. Over time, the needs grew to Rs64 billion in 2019–2020. To a large extent, this is because of the expansion of the road length under the responsibility of NHA, as state highways were transferred to NHA that was considered to be in a better position to finance their maintenance than the provincial governments. The upgrading and new construction of motorways have also led to increased funding needs, the report says.

The RMA is largely dependent on toll revenue, which provided Rs25.6 billion in 2019-2020, equivalent to 64pc of total RMA revenue. The length of motorways and highways under tolls continues to expand, but is limited by the available network.

The report says currently the NHA is faced with encroachment and unauthorised use of the right-of-way and has started mapping buildings and other structures in an effort to regulate the usage of the right-of-way.

The NHA is also facing old leases that were signed by the provincial construction and works departments before the NHA was created, and that provide certain entities with the right to use the right-of-way at no or very little cost, often with very long lease periods of 99 years. The NHA aims to regulate these existing leases and introduce short-term leases for new service stations and other amenities.

Published in Dawn, December 26th, 2022