The Government of India, through amendments to the National Highways Fee (Determination of Rates and Collection) Rules, 2008 (vide G.S.R. 388(E) dated 17th June 2025), has introduced an Annual FASTag Pass for non-commercial vehicles (cars, jeeps, vans). This pass, effective from 15 August 2025, allows up to 200 fee-plaza crossings or one year of validity (whichever is earlier) for a fixed fee of Rs. 3,000, regardless of the toll rates at individual plazas.

Impact on Concessionaire Revenue (BOT (Toll) and TOT Models) 

Revenue Reduction Due to Discounted Toll Collection 

Under the Build Operate Transfer (BOT) Toll and Toll Operate Transfer (TOT) models, concessionaires derive revenue from toll collections based on actual vehicle crossings and applicable rates. The Annual FASTag Pass allows eligible vehicles to make multiple crossings for a fixed fee, which is often lower than the cumulative tolls that would otherwise be collected for 200 crossings. This results in a direct reduction in toll revenue for concessionaires, as the pass effectively discounts the toll payable by frequent users.

Change in Law Clause 

The circulars explicitly state that the introduction of the Annual Pass is to be treated as a “Change in Law” for contractual purposes in BOT Toll, TOT, and Infrastructure Investment Trust (InvIT) projects where the bid due date was prior to the Gazette Notification (17 June 2025).  This triggers contractual provisions that allow for compensation or adjustment mechanisms to protect the financial interests of concessionaires.

NHAI Compensation Mechanism 

Uniform Compensation Mechanism 

NHAI has established a uniform compensation mechanism for User Fee Collection Agencies (UFCA), which is also applicable to concessionaires under BOT Toll and TOT models. The mechanism is based on actual transaction data: the number of Annual Pass vehicle crossings at each toll plaza is determined using data provided by National Payments Corporation of India (NPCI) through Indian Highway Management Company Limited (IHMCL).

The compensation amount is calculated by multiplying the number of Annual Pass transactions by the applicable user fee rates for the relevant vehicle category at that plaza. For return journeys, a multiplier of 1.5x is used. The remittance payable by the UFCA is reduced by the calculated compensation amount on a daily or weekly basis, depending on the contract type.  All transactions are reconciled monthly, and the mechanism is subject to review after three months or earlier if deemed necessary.

Limitations and Adjustments 

Compensation is limited to two one-way Annual Pass transactions per vehicle per day, even if the vehicle crosses more frequently. The mechanism is transitional: after three months, new bids will factor in the impact of the Annual Pass, and no further compensation will be provided for new contracts. 

Termination and Mutual Adjustment 

In case of abnormal changes in exemptions or usage, either party (NHAI or the concessionaire) may seek termination or mutual adjustment of the agreement, as per the contract.

Key Aspects

	Pre-Annual Pass Regime	Post-Annual Pass Regime (with Compensation)
Toll Collection	Based on actual crossings and rates	Discounted for Annual Pass holders; capped at Rs. 3,000 for 200 crossings
Revenue Impact	Full toll revenue	Reduced revenue due to discounted pass
Compensation Mechanism	Not applicable	Based on actual pass usage and rates
Change in Law	Not triggered	Triggered for contracts executed before 17 June 2025
Adjustment/Termination Rights	Standard contract terms	Enhanced rights for abnormal changes

Conclusion

The introduction of the Annual FASTag Pass will reduce toll revenue for Concessionaires under BOT Toll and TOT models by capping the toll payable by frequent non-commercial users. However, NHAI has put in place a compensation mechanism to offset this loss, at least for existing contracts, by reimbursing concessionaires based on actual pass usage and prevailing toll rates. This mechanism is transitional and will be reviewed after three months, after which new contracts will be expected to account for the impact of the Annual Pass in their bids.

Much like how the sector dealt with “Change in Law” due to the introduction Good and Services Tax (GST) in 2017 and change in rates of GST (from 12% to 18%), the key takeaway is that while the Annual FASTag Pass introduces a revenue impact for concessionaires by capping tolls for frequent non-commercial users, the NHAI’s compensation mechanism effectively mitigates this loss in the short term. This transitional approach ensures contractual stability and signals to future bidders that the financial risks associated with such discounts will be fully integrated into their bid valuations after the initial adjustment period. 

Authors: Akshay Malhotra – Partner and Aishik Majumder – Senior Associate

Disclaimer: This note only highlights key issues and is not intended to be comprehensive. The contents of this note do not constitute any opinion or determination on, or certification in respect of, the application of Indian law by Talwar Thakore & Associates (“TT&A”). No part of this note should be considered an advertisement or solicitation of TT&A’s professional services.