India’s central roads authority has reversed an earlier decision that risked cutting base toll rates for the country’s highway concessionaires by 3%-5%.

The National Highways Authority of India (NHAI) rowed back on a September 2025 ruling over criteria used to calculate annual toll rate revisions, according to a circular released today.

In September, the NHAI lowered the so-called linking factor, which is used to determine annual toll rate increases in case of a change in the base year, to 1.561 from its previous figure of 1.641.

However, today it restored the status quo and directed concessionaires to use the earlier figure.

The decision removes uncertainty on valuations and timelines for acquisition deals, said Aakanksha Joshi, a partner at law firm S&R Associates. Joshi specialises in infrastructure and renewable energy.

The latest decision reflects the industry’s requirements, said Puran Grover, director general at the National Highways Builders Federation.

The NHAI’s revision, if implemented, would have meant a 3%-5% reduction in the base toll rates, affecting equity returns of toll road concessions by 100 basis points, S&P Global’s India arm CRISIL Ratings said in a note last October. CRISIL evaluated 64 toll roads with a total investment of INR 950bn (USD 10.8bn).

The Highway Operators’ Association (India) (HOAI) and Roadstar Infra Investment Trust (RIIT) had legally challenged NHAI’s September circular last year, alleging that the linking factor was revised “without any prior intimation or industry consultation”.

The linking factor is used to convert wholesale price index data between different base years and is essential to ensure continuity in applying the index to contracts and projects.

In their petitions, HOAI and RIIT said that the 2018 decision to use 1.641 as the linking factor formed the basis for bids by concessionaires for various public-private partnership projects as well as financing decisions by lenders, including state-run and private sector banks.

Tax issues
Although India’s roads sector has drawn over USD 6bn of investments in highway concessions alone in the last eight years, investors continue to grapple with unpredictable behaviour from government authorities.

This May, an Indian court ruled that financial bids for highway concessions are taxable. The NHBF is seeking the NHAI’s intervention to appeal to the Ministry of Finance, Infralogic reported at the time.

An unresolved tax matter introduces a significant, uncertain cost into bidders’ financial models and prudent bidders will either price in the worst-case tax scenario – resulting in inflating the grant payable by the NHAI – or hold back from bidding altogether, the NHBF then said.

In 2023, the NHAI sided with investors when tax authorities levied 18% on upfront payments by concessionaires in exchange for long-term concessions, Infralogic reported at the time. Tax officials had visited concessionaires’ offices, including Macquarie, and Cube Highways and Infrastructure, questioning officials for hours.