From December 15, the government has decreed that all lanes in India’s national highways, barring one, will only accept cashless toll payments.These ‘FASTag’ lanes penalise anybody who enters one and wants to use cash – they will be charged twice the toll amount. Vehicles without the tag will still have the option of paying by cash in the lone lane that will exist across the 500-odd toll plazas that are part of the road network which comes under the National Highways Authority of India (NHAI).Tolls that are part of state highways and tolled roads built by cities are not legally bound by the notification and might still insist on cash, have their own tags or have fewer FASTag lanes.The ‘voluntary but effectively mandatory’ FASTag proposition will impact India’s economy in a number of ways. While the evangelism around FASTags is one of purported convenience and reducing congestion, the state has multiple unstated aims which should concern all highway users. This includes leveraging Big Data – aggregating electronic toll receipts at a national level – in order to help raise loans for infrastructure development through toll securitisation. The data crumbs that the FASTag network generates will also help the state in disinvesting public-funded highways and monetising highway assets.The role of data and data governance theoretically plays a key role in all of these objectives, but it remains to be seen if datafication will help. What and whyFASTag itself is the brand name for the electronic toll collection (ETC) system operated by the National Payments Corporation of India (NPCI) along with various banks and Indian Highways Management Company Limited (IHMCL). The idea is that all vehicles will be fitted with an RFID tag that is linked to their wallet or bank account, and charges will be deducted as they pass through toll plazas, thus making them cashless.The stated benefits of FASTag include decongesting India’s highways. The idea is that without each car having to pay cash, there will be faster movement through tolls. Other ancillary benefits include reduced fuel consumption, potentially less revenue leakage and increased transparency in processing toll transactions. The technology and historyIndia’s highways have been the highly visible face of development, and ever since the National Highways Development Plan started its work, highways built under it have been largely financed by user fees through tolls. Along the way, we’ve had private investment come along with public partnership to build and manage these highways, some through debt, but all with the expectation that toll user fee collection will give returns to the capital instruments which financed them.The Ministry of Road Transport and Highways (MoRTH), under UPA-II in 2010, set up a committee headed by Nandan Nilekani to study electronic toll collection systems. Also read: Widespread Bribery at NHAI Penalised by US Authorities, But Remains Uninvestigated at HomeIt studied various systems across the world and laid down the technology and high-level roadmap for the project. An apex committee was then formed which suggested that a special purpose vehicle (SPV) be formed with strategic state control. It started a bidding process to select system integrators. ICICI Bank won the bid and was appointed as central clearing house provider in February 2014. It was to be in charge of distributing RFID tags through their franchise network and manage clearing and settlement services to toll operators. The bid was selected based on who will provide maximum percentage of interest accrued out of idle money loaded on tags till they are used. ICICI had offered 176% of MIBOR (Mumbai Interbank Offered Rate) to IHMCL, 76 basis points more than what they would earn. When questioned, ICICI responded by saying they would be charging transaction charges from concessionaires as well – even though that was not mentioned in the project. Documents obtained through Right to Information (RTI) requests suggest that ICICI was quoting much more (176%) than it could earn as charges. FASTag ICICI Bidding by The Wire on ScribdIHMCL felt the ‘irrational’ bid was the reason ICICI was going slow on the project. It consequently served a notice for termination of agreement and in June 2014 additionally permitted Axis Bank to offer the same services at the same rate as ICICI to further FASTag, which in September 2014 became a common brand for electronic tolling service offered by different providers.In August 2015, ICICI still grew slowly (2,200 tags issued across country) and Axis never commenced its services. MoRTH cancelled the entire project and suggested a single provider, preferably a public sector bank, to settle all electronic tolling and hire a consultant to rework the project. Among the reasons mentioned, apart from slow growth, was data not being with the government.The project was reworked to make multiple banks issue tags and multiple banks partner with toll concessionaires to offer services. While it is unknown if there was a bidding process, NPCI, a private non-profit retail payments company run by banks, was awarded the role of clearing house to settle all toll transactions. It has been performing FASTag’s clearing house functions since November 2016, even though it got an official certificate of authorisation from the Reserve Bank of India to do so only in February 2019.Meanwhile, there had been a steady push towards the use of FASTag, including mandating all new vehicles registered to have FASTag during registration from December 2017 onwards and later mandating all commercial vehicles to have them through permit rules in November 2018.The final move has been to notify that users would need to pay double charge for making cash payments on all lanes except one which acts as hybrid lane, effectively forcing people to pay digitally.Privatisation of cashThe FAStag system is complex. NPCI operates the ETC platform, while 22 banks are certified to issue the tags. Ten banks are certified to act as ‘acquirers’ and enter into contracts with individual concessionaires to support the installation of tag readers and provide acceptance infrastructure. IHMCL, an SPV floated by MoRTH, with NHAI owning 41% and the rest owned by highway concessionaires and financial institutions, also issues bank-neutral FASTags, which can be bought online.The electronic toll collection infrastructure is therefore effectively operated both by NPCI and IHMCL, with private and public sector banks, financial institutions and infrastructure companies as shareholders. While IHMCL’s website doesn’t have mandatory disclosures required by the RTI Act, NPCI has argued successfully that it be exempt from the RTI in a case before the Central Information Commission, which dismissed the petition while accepting the company is not significantly controlled by the government. While the commercial agreement was one of the reasons for the project to be reworked in 2015, under the new arrangement, a flat percentage of the toll charges go to IHMCL, NPCI and banks that operate this infrastructure. For example, a car travelling from Tada to Nellore in Andhra Pradesh pays Rs 100 today for the toll by cash which goes to the concessionaire. However under FASTag, the bank which issued the tag (issuer) will get Rs 1.50, the bank that has partnered with the toll plaza gets Rs 1.25, IHMCL gets Rs 1 and NPCI gets Re 0.25. This adds up to 4% of revenue going to electronic toll infrastructure providers, similar to the ~2% merchant discount rate (MDR) on card payments.Also read: Is India Adequately Prepared to Regulate Big Tech?Even though there is a 2.5% cash back to promote usage of FASTag, these will dry up after marketing spends go down and eventually, toll concessionaires will inflate toll charges by 4% to compensate for the cost, something that will impact not just car owners, but every citizen consuming goods transported through national highways.Some issuers also charge a convenience fee, along with the Goods and Services Tax, for loading their FASTag wallets based on the mode of recharge.This effectively requires India’s vehicle owners to pay before they can pay the actual highway toll. The cost of digitising India’s toll collection is squarely put on users, while there are unstated benefits that go to the state and its industry friends.These costs are not just transactional, monetary and personal in nature. There are also long-term costs through data, privacy of individuals and economic interests of the state.Data, privacy and cybersecurityThe ultimate aim of the FASTag system, one can argue, is to capture all activities on India’s national highways in a machine-readable format. While toll plazas have always had CCTV cameras and automatic number plate readers, the data that was captured by old systems were still run by legacy systems and thus offered some amount of privacy. FASTag runs centrally through a single clearing house, making all transactions available to the Centre and also to the issuer banks.Privacy advocates argue that if a cashless mode of toll collection was the goal, why does the government need to collect personal information and link vehicle data with bank accounts (and by extension to Aadhaar and individual identity)? Instead, it is possible to issue anonymous prepaid instruments, akin to a smart card that you would use on a metro. The truth is that these mandatory linkages are crucial. If everyone is on the database, the incentive to do fraud is minimised and traceability is 100%. This effectively gives power to state and non-state actors to act against user fraud, while users have no such power against fraud perpetrated by the system. Technology is also designed with the capability to control. FASTag comes with the potential to blacklist tags, currently used to flag ‘low-balance’ accounts. Tolls are supposed to update these blacklists every 15 minutes. While this feature might be useful to track and geo-fence vehicles, it also gives state and non-state actors the theoretical ability to limit your movement. Imagine your vehicle not being allowed to cross a toll plaza if you’ve missed out on an EMI payment.Even as the rollout is being made quasi-mandatory, India still doesn’t have a personal data protection law that offers safeguards against surveillance. In the meanwhile, it is advisable for individuals to have separate wallet accounts from the bank of their choice and link them with FASTags to minimise the impact of any cybersecurity risks.The ETC infrastructure also centralises transactional data generated by tolls, thus producing one of the largest databases of four-wheelers and commercial vehicles with associated bank linkages. This rich national dataset paves the way for not just individual surveillance, but also economic surveillance and active monitoring of logistics and road transport sectors. Previously, concessionaires used to report revenues and traffic data to NHAI, but with FASTag, data is automatically captured and is available centrally to NHAI subsidiary IHMCL as well as banks and bank-owned NPCI. The government is currently considering integrating toll plaza data with the Crime and Criminal Tracking Network and Systems (CCTNS). If done, not only can vehicles involved in crimes be tracked, but even ‘suspicious’ vehicles can be surveilled. The proposed GST E-Way Bill linkage to FASTags will only pump out more data. The capacity of the state, and its friendly agents, to profit increases drastically without sufficient checks and balances.Infrastructure financing and asset monetisationThe understated agenda behind the FASTag network consists of two major policy goals. The first is using ‘toll securitisation’ – an exercise in which the NHAI raises money from banks against toll receipts – for infrastructure financing. The second is in leveraging data for asset monetisation. This probably also tells us why ICICI was doing ‘irrational’ bidding. The data generated from users can potentially unlock new value when aggregated at a national scale.With banks reeling from a bad debt crisis, the resolution of its infrastructure loans have gotten delayed. There is a general restraint on lending for the infrastructure sector. This has made it harder for highway projects and the NHAI to access credit, crucial for the sector to engage in new projects. Raising funds through infrastructure investment trust (InvIT), toll securitisation and thirdly monetisation of public funded highways by granting long-term tolling rights to foreign institutional investors.In 2016, the Cabinet Committee on Economic Affairs authorised the National Highways Authority of India to monetise public-funded national highway projects. The ToT (toll-operate-transfer) scheme of monetising public-funded highways (highways whose BoT period has expired) has so far seen a mixed response. Also read: With Smart Cities, Your Every Step Will Be RecordedUnder this scheme, multiple highway stretches are bundled and tolling rights for long duration (20-30 years) are auctioned to the highest bidder. Revenues from toll go to the winning bidder, who is also responsible for ongoing maintenance of the highway. The first round saw an overwhelming interest while the second round drew no bids and was scrapped. The third round saw the expected revenue come in.Monetisation Phase / kmPeriodExpectation (in Crores)Bid WinnerAmount (in Crores)Phase 1 – ~700 kmApril 20186,258Sydney-based Macquarie Group9,681.5Phase 2 – 586 kmFeb 20195,362Scrapped–Phase 3 – 566.27 kmNov 20194,995Singapore-based Cube Highways5,011On November 20, 2019 the CCEA also made key changes to the ToT terms (projects after one year of operation and tolling can now be monetised, as against the previous two-year gap) and allowed NHAI board itself to approve ToT proposals. NHAI is expected to monetise 15,000 km of public-funded highway. It also allowed NHAI to raise long-term finance by securitising toll receipts. Toll securitisation will effectively give some cushion for banks to lend to infrastructure projects.It is the FASTag system though, which automates toll user fee collection, that is a crucial part of the puzzle. The role of ETC data in estimating and pricing bid values while monetising highways will become crucial once the FASTag mode of paying tolls gathers momentum.The implementation of FASTag will have an impact on these policy objectives and it remains to be seen how this effort plays out in the real world. While the policy to raise funds through monetisation has started, it is important to ask how the funds raised through monetisation are being put to use. Are they being invested in building more assets or being used to make up for a budgetary revenue shortfall? Additionally, should we revisit the notion of long-term financing through development banks instead of bending to the tunes of the banking sector, which has failed on multiple occasions when it comes to infrastructure financing? If banks are to be recapitalised by taxpayer money and the state requires that a data-intrusive centralised system that violates privacy is what is needed to enable this funding, the fairness of the model is deeply troubling. Srikanth Lakshmanan is part of CashlessConsumer, a consumer collective working on digital payments.
