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How both car owners and govt stand to gain from FASTags

By Subhomoy Bhattacharjee
December 09, 2019 10:58 IST

While the most obvious beneficiary of this roll-out will be manufacturers of FASTags, or the Radio Frequency Identification chips, a PwC report says implementation of a pan-India electronic toll collection system on national highways may help save approximately Rs 87,000 crore annually.

There are big names among shareholders of Indian Highway Management Company (IHMCL) tasked with rolling out FASTags or, universal e-tolling, on Indian roads.

It includes Reliance Industries (RIL), ICICI Bank, and L&T Finance.

 

They are among entities to have picked up stakes, albeit puny, in the company floated by the National Highways Authority of India (NHAI) in 2012 as a joint venture.

As India plans to migrate toll payments on highways to an electronic platform, the interest shown by these firms highlights the business potential.

IHMCL was established as a three-way collaboration between NHAI with banks and leading road concessionaires in December 2012.

Its principle line of business - management of FASTag business - has, however, taken seven years to come through.

The most obvious beneficiary of this roll-out will be manufacturers of FASTags, or the Radio Frequency Identification (RFID) chips.

The technology is simple and is used in most merchandise items sold across the world.

This explains why, besides established global manufacturers such as 3M, Perfect RFID and Star Systems (subsidiary of Star Systems International), 10 domestic firms have also secured a licence from the National Payments Corporation of India to market their chips.

Most of them sell FASTags to car manufacturers, directly.

Since December 1, 2017, all new vehicles on the road have come fit with FASTags.

Manufacturers that have no deals with automakers will hope to cash in on the demand from older vehicles, which will also need the chip.

However, they are also looking beyond.

As soon as this open standard technology becomes common across cities, these chips will spread to Smart City projects.

Municipal authorities are likely to use it for sorting through urban traffic congestions, regulate parking, and enforcing access control and related applications.

Tarun Ahlawat, director of Star Systems, noted that his company had the capacity to produce 10 million FASTags.

"We have complete end-to-end manufacturing of the product," he adds.

Sudipta Roy, head (unsecured assets), ICICI Bank, said: "We think the business potential of the sector is massive.”

A report on the global RFID industry by IDTechEx, an independent market research company that provides business intelligence on emerging technology, estimates the total market for such products to touch $13.2 billion by 2020.

The excitement over FASTag springs from these connectivity possibilities.

Globally, the RFID business is big money.

India could bring a sizeable addition to this market, with the demonstrated efficiency from FASTags.

These tags occupy what is known as the passive ultra-high frequency devices and their growth is the most exciting part of the market.

RFIDs or barcoding allow for savings and that is their attraction.

A PricewaterhouseCoopers (PwC) study for the Indian road sector issued in 2018 claims "implementation of a pan-India electronic toll collection system on national highways may help save approximately Rs 87,000 crore annually…"

The PwC report does not mention but the industry estimates that once successful in raising revenues from the national highways, these tags could spread to the state highways also.

Roy estimates the business potential to be 2 times the current Rs 3,000 crore per month, the central government generates from tolls, electronic and manual in the country.

For companies like RIL, the connection of the FASTag business with their digital business through Reliance Jio is clearly an exciting possibility.

The Ministry of Road Transport and Highways had been toying with the plans to make FASTag universal from 2012 when it had set up the three-way joint venture company.

But it has taken time, as most such projects do in India.

Data from IHMCL shows the current use of approximate revenue of Rs 700 crore.

The percentage of tolls collected via FASTags is less than 30 per cent to the total receipts across the country, but government sources said this number has already jumped close to 50 per cent in the past few days.

ICICI Bank was the first to join the business, says Roy.

It now has company. There are 23 other banks which sell FASTag.

The banks charge every customer Rs 500 for a FASTag.

Of this, Rs 100 is a deposit while Rs 400 goes towards an initial deposit loaded on the chip.

"Customers who pick up FASTags from toll plazas can, of course, get it for free.

"They will need to load the chip with money to use it", adds Roy.

While banks like ICICI prefer the established global players to provide their clients, the domestic manufacturers feel they too can bite into the market.

But none of them are willing to talk on the record.

Emails from Business Standard to all of them approved by National Payments Corporation of India drew a blank.

Asheesh Sharma, chairman and managing director of IHMCL does not see any problems in the roll-out of FASTags.

Once installed in a vehicle, they are supposed to have a life span of five years, which is where the quality differential provided by the established players come in useful.

The antennas at the toll plazas have to read the sensors at high speed so quality is an important issue.

He agrees that the government could have got the data on traffic through establishing sensors at toll plazas without the business of collecting tolls.

But it would have been necessary to finance it from government funds.

“FASTags give the additional benefit of reducing congestion at toll plazas besides cutting down on revenue loss by raising transparency in the system.”

Photograph: ANI

Subhomoy Bhattacharjee in New Delhi
Source: source
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