# Service Costing for Toll Roads
## Background — Build-Operate-Transfer (BOT) Concept
Roads are often constructed by private bodies under government contracts. Once the road is built, the asset is handed over to the government. However, to allow the private builder to recover its cost plus profit, the government grants it the right to collect TOLL for a fixed period.
This is essentially service costing because:
- The "service" is allowing vehicles to use the road
- Costs are recovered per vehicle (composite unit) over a long period
## Equivalent Vehicles — Why Needed?
Different types of vehicles (cars, trucks, buses, two-wheelers) impose different wear and tear on the road. We cannot simply count vehicles. Instead, we use equivalent vehicle units by applying weights:
Example weightage:
- Two-wheeler = 0.5 equivalent vehicle
- Car = 1.0
- Bus / Truck = 3.0
- Heavy truck = 4.0
Total Equivalent Vehicles = Σ (No. of each vehicle × weight)
## Classification of Costs in Toll Road Projects
### 1. Big Capital Expenditures
- Cost of constructing the road, bridges, etc.
- Recovered over the concession period (depreciation/amortisation)
### 2. Repairs & Maintenance
- Periodic repair of road surface, drainage, signages
- Recovered as operating cost
### 3. Recurring Operating Expenses
- Salary of toll-booth staff, electricity, software, security
- Day-to-day cost of running the toll plaza
## Toll Rate Formula
Toll per equivalent vehicle = (Total Cost over period + Desired Profit) / Total Equivalent Vehicles over period
Toll for each type of vehicle = Toll per equivalent vehicle × Weight of that vehicle type