Governments seek debt reprieve as road tolls cut
Local governments have asked Beijing to relax debt repayments for their highways, the indebtedness of which has caused the central government to slow down road construction.
The China Securities Journal, quoting an unnamed Ministry of Transport official, said many provincial governments had requested that the central government waive interest payments for their second-grade highways after tolls were removed on many of the roads.
The gearing ratio of the nation's expressways (the highest grade highways) had reached 70 per cent, above the 58-per-cent gearing ratio of the country's heavily indebted Ministry of Railways, the paper reported.
'The central government is concerned that the expressway sector will repeat the history of high-speed rail, which had a slowdown in construction due to the ministry's gearing ratio of 58 per cent,' said Nomura analyst Jim Wong.
Guangdong province, for example, had invested a total of 300 billion yuan (HK$369 billion) in highways, but 200 billion yuan of that had not been repaid, said Zheng Tianxiang, a transport professor at Sun Yat-sen University in Guangzhou. 'A lot of roads in Guangdong are losing money and will not be able to repay their debt. Many local governments are suffering from heavy debt.'
Because of the debt burden, the National Development Reform Commission (NDRC) announced it would delay construction of new roads, Wong said.
Many mainland highways are struggling to pay interest on their debt since highway tolls were reduced. The central government is moving to abolish tolls on some highways to offset rising oil costs and improve traffic flow, Wong added.
At present, 19 provinces have scrapped tolls on second-grade highways, which account for more than 90 per cent of toll stations on the mainland's 10,000-kilometre road network, China Securities Journal reported.
Many mainland roads should have abolished toll collection long ago because, in theory, they would have repaid their debt. Yet, many are still collecting tolls and are heavily indebted, said Zheng. 'Toll collection has not been transparent. The central government is cracking down on these highways,' said Zheng.
'Not all highways falsify their finances, but some do,' he added. 'They are losing money, yet they pay their staff high salaries because of collusion with special interest groups. Tolls are a good way to finance roads, but the government has been negligent in supervising it, so it has become chaotic. The government must audit both the debt and toll collection.'
Yesterday the Ministry of Transport announced it would increase efforts to rationalise toll collection on the nation's roads.
'Against excessive toll collection, high toll fees and irregularities, the ministry requires the abolition of illegal toll stations, the lowering excessively high toll fees and a ban on local authorities from unilaterally collecting tolls,' said the ministry.
The estimated cost of the mainland expressway network, which was 85,000km long at the start of 2012