Analysis of Toll Rates to Optimize Revenues of the Lahore – Islamabad Motorway (M-2)

Abstract

Lahore – Islamabad Motorway (M-2), is the first access control tolled facility in Pakistan built using part contractor financing, which has added to the debt portfolio of the country. It is, therefore, imperative that this large asset investment yields maximum returns particularly in terms of toll revenues and through other measures.

National Highway authority (NHA) commissioned a toll and revenue study in 1996, which was conducted by SMEC, Australia, Babtie international Limited, UK and Pantic Pakistan (The Consultants).

The study recommended a certain level of toll rates to optimize the toll revenues, on M-2. The recommendation of the study were not fully implemented. Since its opening to traffic in 1997, M-2 is in operation now for 4-1/2 years. NHA has arbitrarily tried to adjust the toll rates to maximize the toll revenues. However, these efforts did not result in any significant improvement in the revenue collection.

Therefore, this study was undertaken to scientifically study and update the previous studies aimed at determining whether or not majority of the long distance north-south through traffic between Lahore and Islamabad has been diverted from the GT Road M-2, and if not, can more traffic be attracted to M-2 corridor by adjusting the toll rates and implementing various other measures. In the N-5 survey, questions were asked regarding M-2 toll rates, axle load control, perceived police harassment, Salt Range, vehicle repair facilities, service area rates, fuel costs, unavailability of CNG stations and other factors that might be the cause of non usage of M-2 or by potential diversion traffic moving on N-5. Further N-5 traffic was asked to identify toll rates that they are willing to pay on M-2. In the M-2 Survey similar questions were posed to the road users to seek suggestions to improve the user- customer satisfaction. Based on the N-5 survey results it is estimated that 1000 to 1500 vehicles can be potentially diverted from N-5 to M-2, if the optimum toll rates identified in this study are enforced for through traffic only at the main line Lahore and main line Islamabad toll plazas. Daily revenue increase is estimated to be Rs. 150,000/- per day which translates in to Rs. 54 million per year.

Results analysis revealed that toll rates for through traffic between Lahore and Islamabad Motorway be further rationalized to divert / attract an additional traffic from GT road N-5 to M-2 motorway resulting in additional revenue generation. Similarly this study found that there is no need to decrease the toll rates on 18 interchanges since there is hardly any competing route. For example for people travelling from Islamabad to Faisalabad there is a time saving of 4 hours. Therefore original rates may be applied back to increase the toll revenue.

In addition to the above toll rates the M-2 survey results show that authority concerned with M-2, need to implement the following other measures : 1. Enforcement of axle load control on N-5. 2. Check Perceived Police Harassment on M-2. 3. Reduce service area amenities along with improvement in quality of services. 4. Provide CNG stations on M-2. 5. Carry out improvement of Salt Range. 6. Add PSO filling stations to allow NLC (which is the largest truck fleet owner) to facilitate their usage of M-2. 7. Carry out development activities along interchanges like duty free zones, dry ports, recreational spots, housing schemes, industrial zones etc. 8. Expedite completion of Burhan M-1 to section from M-2 interchange, and M-3 and M-4 Motorways to fully realize the inherent potential of motorway programme.