The southern loop of the Lahore Ring Road (LRR) was recently opened. One can virtually drive non-stop from Shahdara Interchange to Raiwind Road. With convenience, however, comes the price. One has to pay Rs35 to use the LRR, irrespective of the distance covered. The toll for using the northern loop was Rs20 until a few days ago. This increase led to an uproar on social media.
While it would make sense to increase toll rates, is this increase really excessive? Why does the government even need to charge a price? And how should the government approach this issue?
The LRR, a signal-free high-speed corridor around Lahore, is a landmark project of the provincial government. At present, the road comprises 40km-long northern loop from Gulshan-e-Ravi to Phase V DHA and the 22km-long southern loop extending it to Raiwind Road. The LRR will have two more components SL-3 and 4, which will complete the full loop. The road is expected to take considerable intra-city traffic load.
The present toll rate of Rs35 for 62km translates into Rs0.56 a km. However nobody is expected to travel the full loop. The same toll translates into Rs0.87 a km for northern loop and Rs1.6 for southern loop. People travelling shorter distances have a much higher applicable per-km rate.
In comparison, the most recent toll rate for Lahore-Islamabad Motorway is about Rs1.65 a km and it takes Rs35 to cross Kanna Bridge (built on build-operate-transfer basis) or Rs50 to park a car at Lahore Airport. The LRR toll rate therefore looks quite reasonable.
Furthermore, the southern loop has been constructed under public-private partnership (PPP), with the private sector bearing bulk of the project cost and taking responsibility for its complete maintenance and carpeting it twice. The contractor is expected to recover its costs through the toll payments for 25 years.
The traffic count is projected at 80,000-100,000 cars per day for northern loop and 40,000-50,000 for southern loop. This is likely to result in revenue of Rs1.5 to Rs1.9 billion a year. Considering that the private sector is expected to recover roughly Rs20 billion investment in debt and equity along with bearing Rs1.4 billion of maintenance costs per annum, the toll seems quite fair.
Irrespective of the fairness of the toll rate however, the first priority of the government should be that maximum number of people use the LRR to take the traffic burden off the city roads. A motorist using it will spend more in fuel costs but is expected to save time. Take the case of an average user travelling from DHA Phase V Lahore to Gulshan-e-Ravi through the northern loop. He will have to drive 18km more but can save 5+ minutes with existing traffic patterns, while someone travelling to Wapda Town via the southern loop will drive 10km more but also save 10+ minutes. Another factor negatively influencing motorists’ decision is the Bund Road traffic congestion. Considering these factors, any slight alteration in toll can tilt the value proposition of motorists and change their decision either way.
PPP projects provide a suitable way to charge the infrastructure costs only to users and not the general public through taxes. But even in the UK the outer and inner ring roads in London are toll-free.
Moreover, many countries are also exploring other financing alternatives. In some cases, for instance, immense gains in urban land values attributed to new roads are unlocked and used to build infrastructure. The 76km-long Ahmedabad Ring Road, for instance, in India was also built through such a model.
While the government must look for such innovative options to meet future infrastructure needs, the government should introduce a distance-based toll structure, where shorter distances would require lesser tolls.
Published in The Express Tribune, January 30th, 2018.