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What makes FASTag the biggest disruptor on India's national highways

The National Highways Authority of India introduced FASTag, which uses RFID technology and allows cars to pass toll plazas without stopping for payment
India’s third major experiment for the road sector in less than three years has just begun this December. It is the plan to make every vehicle that uses national highways pay tolls electronically.

A year ago, India had moved from a single-year insurance policy for vehicles to a multi-year policy. And, from next year April, any new vehicle sold will have to operate under the stringent BS VI emission norms.

There have been other tweaks in between, like making driving licence rules stiffer and a massive jump in fines for traffic offences. Altogether, highway driving rules in India has never faced so many changes in such a short time.

Of these, the introduction of FASTag, essentially Radio Frequency Identification (RFID) chips on all vehicles, could prove the most disruptive. Though all automobiles that have come out of showrooms since December 2017 are now fitted with these devices, they have often remained decorative pieces. Older vehicles will have to get the chips installed on windscreens.

But from December 1, these chips have begun to become active. Tolls can only be paid by these chips. From  December 15, vehicles that do not show up at the toll plazas with these chips will have to pay twice the amount as penalty.

“The government is not keen on earning the penalty, seeks to inculcate a habit among the users of paying tolls electronically,” said a source in the ministry of road transport and highways. The ministry had been toying with the plan to make FASTag universal from 2012, when it had set up a three-way joint venture company, Indian Highways Management Company Limited (IHMCL), as a collaboration between NHAI, banks and leading road concessionaires. NHAI holds a 41.38 per cent stake in IHMCL, the concessionaires another 33.81 per cent and the financial institutions the remaining 24.81 per cent. Like most things in India's digital economy, this too was based on a report written by Nandan Nilekani.

After several attempts, the ministry hopes this December will mark the beginning of change over at the national level to an entirely electronic system of toll collections on India’s national highways. Asheesh Sharma, chairman and managing director of IHMCL, says FASTags will throw up data on the number of cars that use a stretch of road, accurately. “It will provide the bidders for toll-operate-transfer road projects data that they are not able to get now. With the data, pricing will be better to give the government better monetisation of these assets.” 

Data from IHMCL shows in the first week of November, the number of tolls paid through FASTags was 7.27 million. In money terms, the collection was a little more than Rs 173 crore. Assuming the trend held for the month, the numbers would be close to 30 million a month, for an 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. A PricewaterhouseCoopers study notes that the average number of e-toll transactions per month at all the toll plazas in the month of April 2017 was around 7.5 million.

Electronic toll collection had long ago emerged globally as the key solution to enable a fast, efficient and cashless payment option for collection of fare for using highways. The world’s first electronic toll plaza began duty in Norway in 1986. By the turn of the century, several countries had adopted it. In Asia Japan began it in 2001 and China in 2014. India had obviously lagged. One of the essential requirements for the system to operate is the need to provide an integrated centralised system that provides an interoperable solution across all the national highway toll plazas of the country. It has now become possible with the creation of National Payments Corporation of India (NPCI).

How National Electronic Toll Collection works

How FASTag works

It is a deceptively simple technology that goes through eight stages of signal sharing between the banks that have issued the FASTag, the National Electronic Toll Collection switch operated by NPCI and the toll gate, all in a span of few seconds.

As a car with a FASTag approaches a toll plaza, the antennae at the gate locks on to the radio frequency of the tag and puts a question to the acquirer bank (with whom the toll operator does business) to validate the tag details. The bank asks the NPCI switch to cross check the vehicle’s details. If the details match, the switch confirms the tag is fine to the bank, which then calculates the toll fare. The acquirer bank will now again ask the NPCI switch to debit the toll from the customer’s FASTag. The switch now asks the bank from whom the FASTag has been bought (issuer bank) to debit the money from the customer’s account. If the FASTag is topped up, the transaction goes through and the issuer bank sends an sms alert to the customer. If the response from the bank is not sent within the defined time limit, the transaction is considered as “deemed accepted”. But the system of signals are not over yet. The NPCI switch will notify the acquirer bank that the transaction has happened and the bank will in turn notify the toll operator. Phew!

The presence of NPCI ensures that any bank can issue a FASTag, though at present only 24 are listed for this business on their platform. However of these only ten have set up the technology platforms to offer their business to the toll operators. The list includes Axis bank, SBI, HDFC Bank, ICICI Bank and PNB among others.  

Clearly, since FASTags come loaded with the vehicle specifications, once installed, these cannot be changed across automobiles. Customers can either top up their tags by linking it with their bank accounts, or have a prepaid system. In either case, they are eligible for a 2.5 per cent discount. But the problem with a prepaid account is that the customer will need to remind herself to recharge it. If it isn’t, the tag gets blacklisted at the toll plaza and there is a tedious process of halting, paying the penalty and getting the FASTag back into the system. 

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