Toll collection: User-sponsored fund for road maintenance

The Cabinet at its March 24, 2014 meeting unanimously approved the 'Toll Policy 2014' and decided to collect toll, in phases,  from all vehicles which include trucks, buses, lorries and bicycle-rickshaws using national, regional and inter-district highways. The money thus collected would be utilised for repair, maintenance and development of roads, bridges, etc. Both the print and electronic media gave due importance to this unique cabinet decision, first of its kind since 1972.  The implementation of the Toll Policy 2014 will have impact on vehicles using 21,481 km highways: 3,544 km national, 4,278 km regional and 13,659 km inter-district roads under the Roads & Highways Department (RHD). As per this policy decision, out of 7,741 bridges under the RHD, those over 200 metres in length, will also come under the toll collection net.
The Communication Secretary stated that toll would be introduced on the newly-constructed highways from the beginning. For instance, the toll on the Dhaka- Chittagong Highway would be introduced after the completion of its expansion work. He added that all the roads and bridges connecting the capital city with other areas would be exempted from the purview of the toll policy, as it might cause further traffic congestion. He further said that toll is currently collected from the port access road in Chittagong, Jagadishpur-Sherpur Road on Dhaka-Sylhet Highway and Chalan Beel Road on Dhaka-Natore Highway and that the toll policy would be introduced soon all over the country and a gazette would be issued to this effect.
On the other hand, the Cabinet Secretary told reporters that the government would bring highways under toll coverage in phases. He said that "The collected toll will be kept in the Road Fund which will be spent later on development and maintenance of the road infrastructure across the country". He added that vehicles have been divided into 13 categories for toll collection, and the lowest toll of Tk 5.0 would be for rickshaws and the highest Tk 1,000 for trailers. There would be Tk 300 "base toll" for national highway, Tk 200 for regional and Tk 100 for inter-district highways. Some highways will be designated as "important" and their base toll would be Tk 400.According to the policy, trailers would be charged 250 per cent of base toll, heavy trucks 200 per cent, buses 90 per cent, minibuses 70 per cent and private cars 25 per cent, said the Cabinet Secretary.
The policy was formulated under the purview of the Toll Act 1851. The World Bank recommended formulation of such a policy.
However, a revised government order was issued on June 26, 2014, which stated that the imposition of tolls would be made effective from November 01, 2014 and not from July 01, 2014, as said earlier. Consequent upon this policy, mechanism/formula(s) were framed to impose tolls at the same rate on 61 RHD bridges and, accordingly, tolls on 50 bridges will increase at the rate of 2.27 per cent to 1000.25 per cent in consideration to the types of vehicles. And in the remaining 11 RHD bridges, the toll rate will be decreased from 3.57 to 0.75 per cent on the vehicles using those bridges.
Tolls will be realised by appointing contractors through bidding or open auction and by the RHD itself, if there is no bidder, according to official sources.
EARLIER INITIATIVE: A similar initiative to introduce toll collection was proposed in May 2004. It was stated that transport infrastructure in Bangladesh was receiving only a small portion of its full maintenance need due to lack of funds. The donors also said that it was not possible for the government alone to allocate sufficient funds for transport maintenance as it had financial constraints.
In that consideration, the proposed fund would fully finance all road maintenance infrastructure activities and also other works such as rehabilitation and road-safety improvements, the donors said prior to the 3-day meeting of Bangladesh Development Forum (BDF) which began on May 08, 2004, in Dhaka. The Local Consultative Group (LCG) of the World Bank-led donors made this proposal in a paper titled Providing the Infrastructure to Support Growth and Development. It was observed: "Each taka deferred from road maintenance increases vehicle operating cost with 2-3 taka. The road infrastructure is Bangladesh's single-largest asset. Deferred maintenance results in assets being lost, reduced access, and employment opportunities, direct and indirect, not realised".
It was further stated: "We all agree that a country's ability to develop its economy is closely linked to the efficiency of its transport system, and we certainly realise from that the devastating impact a deteriorating infrastructure would have on economic growth and poverty reduction."
After a lapse of 10 years, we see that the present government has boldly initiated almost a similar step for user-sponsored fund for road maintenance through toll collection from all types of vehicles, including rickshaws, using all national, regional and inter-district highways, constructed/to be constructed and/or expanded by RHD.
INTERNATIONAL WORKSHOP ON ROAD MANAGEMENT AND FINANCING: During Sheikh Hasina's first term as prime minister, an International Workshop on Road Management and Financing was held on November 01-02, 1998 in  Dhaka. Internationally reputed road experts like Henry R Kerali of the University of Birmingham, lan G. Heggie, Road Adviser, the World Bank, Washington DC, Kavita Mathur, Consultant the World Bank, Dr. M Rahmatullah, Director  ESCAP (recently expired) and noted road experts from Pakistan, India and Bangladesh took active part in identifying the issues and problems relating to Road Management and Financing in the context of Bangladesh. Then Anwar Hossain Manju was the communication minister, Syed Rezaul Hayat communication secretary, and a group of dedicated and experienced bureaucrats and technocrats were in the ministry concerned and the Roads & Highways Department (RHD). The welcome address to this workshop was delivered by this writer (as joint secretary, administration, of the ministry). I said, "I understand the workshop has been designed to prepare implementable guidelines and policies for proper management of a road  network and for developing proper systems for ensuring availability of proper fund to this effect continuously. We hope we may find out some implementable recommendations out of this workshop."
ISSUES OF THE WORKSHOP: The road network of the country is not properly managed to extract optimum economic benefits from the investment in long-term and short-term perspectives.
This is caused mainly by paucity of allocation and timely release of adequate funds. As a possible solution, the policy-makers in road agencies are insisting that road maintenance service should be treated as public service similar to water supply, telephone and electricity services and also may be treated as user-pay-for-the-service-received. This will help not only to generate requisite funds for proper management of the road network, it will also create bigger scopes for the users for active participation in policy making and implementation as well. In the paper titled Commercially Managed Road Funds: Managing Roads like Business, Not like a Bureaucracy, Ian G. Haggie, Road Adviser, World Bank, dwelt at length on these issues.
Mr. Heggie said, "There is a growing awareness that nearly all countries which finance their roads through the consolidated fund are seriously short of revenues for investment and maintenance of roads. Shortage of revenues for investments is leading to high levels of congestions, poor road safety, poor environmental conditions (particularly in built-up areas where major new roads cannot easily be built) and high vehicle operating costs, while shortage of revenues for maintenance is leading to a growing backlog of deferred maintenance. As a result, governments world-wide are attempting to generate additional revenues for roads by: (i) improving utilisation of the existing road budget; (ii) requesting additional resources from the government's consolidated fund; and (iii) introducing tolls on high volume roads or inviting the private sector to build and operate such roads under concession agreements. Improved utilisation of the road budget has mainly focused on improving planning and programming of road works, strengthening market discipline by contracting works to the private sector (or transferring implementation of works into a separate organisation which can be subjected to some form of surrogate market discipline), and moving towards longer-term contracts, covering more than one road section and utilising performance specifications or other incentives to reduce cost and improve quality. These actions regularly produce cost savings of 15 to 20 per cent (Highways Agency, 1997) and, exceptionally, may reduce them by 30 per cent or more (Frost and Lithgow, 1996).
"However, although this effectively adds additional funds to the road budget, in most countries it has merely narrowed, rather than eliminated, the financing gap. Most countries have also requested additional resources from the government's budget. They have urged the Ministry of Finance (MoF) to allocate more funds for roads, based on the high rates of return on new road works and even higher rates of return on maintenance and rehabilitation projects (World Bank, 1994). Although these efforts, sometimes, result in a  temporary increase in the road budget, particularly when they are accompanied by increases in road-user taxes and charges, the increased revenues are subject to the usual budgetary pressure, and the allocations usually drop back to their original levels within a few years."
Mr. Heggie added that the pressure on the road budget is caused by four main factors, which are common in Bangladesh context as well: (i) government budgets are under increasing pressure from demands by other sectors (education, health and social security being the main contenders); (ii) taxpayers are unwilling to tolerate continual increases in tax rates; (iii) maintenance spending can always be deferred with little visible short-term impact; (iv) road spending, particularly when support for local-government roads is included, has become so large that it can no longer be fully financed from the government's budget. Government budgets were not designed to finance major economic sectors like roads and as the road sector has grown to become one of the largest businesses in the country, financing from the consolidated fund has became difficult, if not impossible to sustain. The shortage of budgetary resources caused many road agencies to turn towards tolls, said Mr.Heggie.
However, a toll expressway link will only cover all costs when: (i) traffic volumes are at least 10,000 to 15,000 vpd (vehicles per day) and continuously  growing; (ii) average toll rates for private vehicles are $0.03 to $0.06 per km; and (iii) the cost recovery period is 20/30 years (International Road Federation, 1996). At volumes of around 5,000 to 6,000 vpd,  revenues will usually cover operation and maintenance, and may make some contribution to initial construction cost on new roads, or rehabilitation and upgrading costs on existing roads.
The balance of the finance has to come from the road budget. Toll-roads can, therefore, play an important role as a mechanism for financing high-volume roads, but these road only account for between 5 and 20 per cent of the trunk road network and 1 and 2 per cent of the overall road network (Estimated figures in terms of number and rates per km were applicable to the late '90s).
Mr. Heggie cited some interesting examples relating to revenue problems on control and management of toll funds:
l funds were collected, but paid into unauthorised accounts;
l payments made to district treasuries and commercial banks failed to appear in  the road fund account;
l there was insufficient documentation to validate whether all fuel levies had been paid into the road fund account;
l funds were collected by the oil company, but significant amounts disappeared before being deposited into the road fund.
Examples of unauthorised withdrawals include:
l money was taken from the road fund to pay salaries of civil servants;
l although the funds were intended for road maintenance, they were instead used for purchasing vehicles, refurnishing State House/Guest House and the even Parliament building;
l funds were used to pay for non-qualifying items, including hotel bills, construction of houses, refurbishment of  offices, utility bills and gratuities;
l although the funds were intended for maintenance, money was borrowed to finance capital works.
Examples of payment for substandard work or for goods and services not delivered include:
l payment was made for vehicles and materials which were never supplied:
l an inspection of some rehabilitated roads showed they were still in poor condition;
l funds were used lay 40mm thick asphalt concrete on a newly constructed carriageway - however, an audit site visit could not trace the newly-constructed carriageway and the street was found to be in a "pathetic" condition;
l a contractor was paid to construct three culverts which could not be traced during a site visit.
WHY IS THIS PROBLEM? The main factors which lead to the above problems appear to be
related to:
l lack of oversight: no one is held responsible for the poor performance of the road fund;
l lack of oversight is often aggravated by poorly drafted laws and regulations (or absence of specific regulations spelling out how the road fund is to be managed) and lack of rigorous technical and financial audits;
l the source of  revenues is not clearly specified, funds are transferred through the ministry of finance account, and there is no mechanism to readily adjust the amount of revenue going into the road fund;
l there is no independent secretariat to manage the funds, or they have wrong qualifications.  
The writer is president, the Chartered Institute of Logistics & Transport (CILT), Bangladesh Council.
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