In this thought-provoking piece Andy Mukherjee highlights that whilst India has built the world’s second largest road network, the high cost of using this network is robbing the country of the economic benefits of the said network.
First off, Mr Mukherjee, informs us of the massive scale of India’s highway network: “At 6 million-plus kilometers (4 million miles), India’s road network is now the second largest in the world after the US, according to official data from New Delhi. Leave aside the vast differences in their quality, the most-populous nation has more than twice as many kilometers of roads per square kilometer of land as the US, a much bigger country by size. China, which has built a lot of highways but chosen highspeed trains as the focal point of transport, has a much lower density.”
He then helps us understand why India’s highway network is costly to use – Indians, we learn, pay $7bn in road tolls each year: “Much of India’s national highway system was built in the past 25 years. It has been the country’s single-largest infrastructure development, ahead of railways and power, with nearly $30 billion invested last year. But since the network has been expanded with expensive debt, the cost to users is high.
A still-small, car-owning middle class (fewer than one in 10 households) is feeling squeezed by the $7 billion it pays in tolls every year. The National Highway Authority, which racked up more than $40 billion in debt, is deleveraging. It’s selling assets to private operators and investment trusts; it’s also securitizing a part of its portfolio. But no matter who owns them, debt financing means roads still have to generate revenue. The burden on motorists will only swell as new highways get constructed.”
So what can India – a poor country which has built a vast highway network at great cost – do? As one would expect, other countries have faced this problem before and solved it with reasonable success. Mr Mukherjee writes:
“The US confronted the debt-financing problem well before President Dwight Eisenhower started the interstate highway program in 1956. Toll Roads and Free Roads, a 1939 report prepared for Congress, rejected the usage-fee option as revenue from traffic in many places wouldn’t be enough to retire the bonds needed to back them. So the funding came from the government, which taxes motorists on gasoline and diesel.”
However, the problem for the Government of India is that it already taxes fuel and vehicles heavily and uses those monies to fund other spends (rather than roads). Roads therefore have to be paid for through tolls thus making driving cars on India’s highways a busy proposition (which explains why some of us in Marcellus, having done the math, no longer own cars).
Finally, Mr Mukherjee also highlights the opportunity cost to India of investing so much on roads – the country’s rail network is languishing:
“For intercity travel, India’s template ought to have been 21st-century China, not 20th-century America. The fastest train journey between Chennai and Bengaluru, two hubs of activity in southern India, takes over four hours. In that time, one could go from Beijing to Shanghai, a distance nearly four times greater. Whoosh, the Jakarta-Bandung line that Indonesia built with Beijing’s help, is a good model. New Delhi, however, doesn’t want a new dependence on China, even though its own first high-speed line, being built with Japan’s shinkansen technology, is running years late.”
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