Compensating Toll Operators: NHAI’s SOP and Supplementary Agreement for the Annual Pass Scheme

In a proactive step to safeguard the financial equilibrium across public-private partnership (PPP) projects, the National Highways Authority of India (NHAI) has issued a comprehensive Standard Operating Procedure (SOP) along with a draft Supplementary Agreement to operationalize the compensation mechanism arising from the introduction of the Annual Pass Scheme under the National Highways Fee (Determination of Rates and Collection) Rules, 2008.

The policy, notified through Circular No. 17.7.12/2025 dated October 17, 2025, establishes a uniform and transparent methodology to compensate concessionaires under BOT (Toll), TOT, and InvIT models. This move aligns with the framework earlier issued by the Ministry of Road Transport and Highways (MoRTH) and ensures financial neutrality for concessionaires impacted by the new scheme.

The policy stems from Gazette Notification bearing reference no. 388(E) dated June 17, 2025, by which the Ministry of Road Transport and Highways (MoRTH) inserted sub-rule (3B) under Rule 9 of the National Highways Fee (Determination of Rates and Collection) Rules, introducing the ‘Annual Pass’ for non-commercial vehicle owners with valid FASTags. Priced at Rs. 3,000 for FY 2025-26, the pass entitles the holder to either 200 toll-free crossings or one year of validity, whichever occurs earlier. This initiative, effective from August 15, 2025, is aimed at providing convenience to frequent highway users while encouraging consistent electronic toll usage.

Given that the introduction of such a flat-rate annual pass would inevitably affect toll revenues under pre-existing concession agreements, MoRTH, through its Circular bearing reference No. H-25011/11/2024-Toll (E-245444) dated August 11, 2025, clarified that the amendment constitutes a Change in Law for projects whose bid due dates preceded June 17, 2025. Subsequently, a dedicated compensation framework was notified under Circular bearing reference no. H-25011/05/2025-Toll (E-245443) dated September 1, 2025, ensuring equitable treatment of concessionaires and maintaining financial equilibrium under existing contracts.

Key Provisions: Following MoRTH’s policy guidance and the 683rd Executive Committee meeting held on September 19, 2025, NHAI’s SOP outlines the following structured process for compensation:

1. Execution of Supplementary Agreement: GMs (Technical) will execute agreements with BOT (Toll) concessionaires, while GMs (Finance & Accounts) will handle TOT and InvIT projects to ensure prompt commencement of compensation release.
2. Data Source and Plaza Constant: The concerned General Manager (Technical)/(Finance & Accounts) shall obtain Electronic Toll Collection (ETC) data from the Indian Highways Management Company Limited (IHMCL) to determine the plaza constant in accordance with the methodology outlined in the Supplementary Agreement.
3. Automated Computation Portal: Compensation will be computed through a dedicated online Compensation Portal developed for this purpose, which has been integrated with the National Payments Corporation of India (NPCI) to access verified Annual Pass transaction data.
4. Frequency of Compensation Payments: Compensation payments shall be released weekly by the F&A Division at NHAI Headquarters with a one-week buffer period (for example, compensation for the first week shall be disbursed by the Tuesday of the third week). Intimations of payments released by Headquarters shall be communicated to the respective Project Implementation Units (PIUs) for record-keeping.
5. Quarterly Reconciliation: A quarterly reconciliation exercise shall be undertaken by the F&A Division covering both compensation payments and exemption data, in accordance with paragraph 3(ii) of MoRTH Circular dated September 1, 2025.

This structured operational framework ensures uniformity, transparency, and accuracy in compensation disbursal while maintaining alignment with the principles set out in the MoRTH circular and the Supplementary Agreement.

Annexed to the circular, the draft supplementary agreement forms the legal backbone of the compensation mechanism. It formalizes the understanding between NHAI and each concessionaire on the applicability, calculation, and disbursement of compensation, while preserving the core provisions of the underlying concession agreement. The agreement explicitly incorporates the MoRTH notification and circulars as integral parts of the contract framework.

Key provisions of the Supplementary Agreement include:

1. The notified annual pass scheme applies to all project highways, with concessionaires extending its benefits to eligible users.
2. NHAI shall compensate concessionaires for revenue shortfalls solely arising from the Annual Pass Scheme.
3. Daily compensation will be computed as A × NAP × F, where A represents the Plaza Constant, NAP the number of Annual Pass transactions within limits prescribed by MoRTH, and F single-side applicable fare.
4. Compensation shall be disbursed weekly through NHAI’s Compensation Dashboard and reconciled periodically as per MoRTH guidelines. The compensation mechanism may be reviewed after 31 March 2026 based on adoption levels and financial trends.
5. No additional claims or damages beyond the Supplementary Agreement and MoRTH circular shall be admissible.
6. Except where expressly modified, all provisions of the original concession agreement shall remain in force.

The circular and supplementary agreement provides a balanced, transparent mechanism that safeguards concessionaire interests while advancing policy objectives. Through a data-driven and accountable framework, NHAI reinforces fairness, financial stability, and clarity in toll operations, ensuring that the Annual Pass Scheme strengthens rather than disrupts the existing PPP ecosystem.

In essence, this policy framework exemplifies NHAI’s proactive approach to harmonizing legal, financial, and operational interests under changing regulatory landscapes, ensuring that public policy reforms such as the Annual Pass Scheme are implemented without disrupting the contractual and economic equilibrium of India’s expanding toll road network.