The FASTag fiasco

At a toll plaza in Tamil Nadu, announcing FASTag.

Three years after the colossal failure of demonetisation the Narendra Modi government has embarked on a similar venture, the FASTag programme, this time targeting road users across the country. But just a day before the November 30 deadline, by which date all vehicles plying the highways would have been mandatorily required to affix an RFID (Radio Frequency Identification) tag on their vehicles, the government blinked. And, like demonetisation, the design of this scheme also reflects a simpleton’s naivete. The announcement that those without the tag would be charged double the tariff at the toll gates set off a firestorm of protests on social media. On November 29, Minister for Road Transport and Highways Nitin Gadkari announced that the scheme would come into force only on December 15.

The FASTag is a passive sticker which enables scanners at toll gates to automatically deduct the toll from users’ accounts. Gadkari and others claimed that this would ensure seamless movement of vehicles, resulting in time and fuel savings. While that is obviously an honourable motive for a countrywide rollout of the scheme, what Gadkari and others promoting the scheme did not say leaves much room for scepticism. First, the compulsion inflicted on road users—on the pain of having to pay double the normal toll—was obviously objectionable. This was reminiscent of demonetisation when citizens, especially the poor, were compelled to use non-cash forms of payment even when they did not have the means. The second objection arises from the legal, ethical and moral questions that arise from the fact that users are now being forced to not only install the tags but do it by using a platform that is privately owned.

A third set of objections arises from the fact that FASTag scheme is likely to impose significant costs on users. The Merchant Discount Rate on FASTags now stands at 4 per cent, far above the rates for credit and debit card transactions. The banks are the biggest gainers from this. The issuer as well as the acquirer bank together account for a whopping 2.75 per cent of the value of every payment made by road users. The Indian Highways Management Company Limited (IHMCL), which implements electronic tolling in India and which is a subsidiary of the National Highways Authority earns 1 per cent. Significantly, the IHMCL is not a government-owned company; while the NHAI owns 41.38 per cent, the concessionaires hold 33.81 per cent and the remaining shares are owned by banks. The National Payments Corporation of India (NPCI) will get the remaining 0.25 per cent of very transaction. Although defenders of the scheme have argued that this cost will not fall on users, but only on toll concessionaires, the argument is specious. It is like saying that buyers of commodities do not pay goods and services tax (GST), it is only the shopkeeper who pays GST to the government. In any case, it is obvious that the charge would be loaded into the tariff as and when they are revised.

The real motive of the government in the headlong rush to implement the FASTag scheme appears to be elsewhere. It appears that its failure to bring the notoriously dodgy toll operators to clear their dues is the real reason why FASTag is being implemented. Indian highway projects have been known to be utterly non-transparent, especially when they were implemented in the public private partnership (PPP) mode; the notorious case of the IL&FS, which can only be described as the Mother of all PPPs, illustrates the utter opacity of their operations. The government’s inability to control cost-padding by private builders, and therefore tariffs based on such costs, is what has resulted in the sharp escalation in toll charges across the country in recent years.

Meanwhile, the banks, which were supposed to ensure that toll operators put their revenues in escrow accounts so that the financial institutions rightfully enjoyed first charge on revenues from projects, found revenues leaking, obviously because cash collections were not being deposited in the designated accounts. The FASTag is supposed to plug this loophole. To justify the tag on these grounds is a far cry from making lofty claims about how it is meant for the benefit of the humble user. To add insult to injury, the threat of doubled tolls for those who do not comply makes it truly egregious.

Of course, an RFID tag-based system would improve efficiencies. But if this is genuinely the motive, it is certainly not compatible with a regime that allows banks to make a killing out of users’ compulsion. It is already clear that the banks are sitting pretty because the tag system has ensured money being deposited by users in the tag accounts with banks; the banks also gain by way of fees paid every time a user crosses a toll gate. That the FASTag fiasco comes after the demonetisation disaster and the farcical GST says much about the Modi regime’s persistent resolve to indulge in adventure at the cost of the people.