User charges
Also called: User fees · Topic: Infrastructure: Transport, Communications and Energy · NCERT: Beyond NCERT
Meaning
User charges, also called user fees, are payments made by the people who use a piece of public infrastructure or a public service. Common forms are tolls, electricity or water tariffs, and fares. The money helps recover the cost of building and running the asset. The alternative is to pay from general taxes. The case for user charges is that the people who use the asset pay for it, which recovers costs and discourages wasteful use. The case against is equity (fairness): not everyone can afford to pay. Private providers may charge high rates, which is one reason the state often provides such services itself.
Example
Tolls on national highways are user charges. FASTag, electronic toll collection that has been mandatory on national highways since February 2021, makes collecting these charges quick and cheap.
Don't confuse with
- Value capture financing: under user charges, people pay for using the asset, while value capture financing collects from landowners whose property rises in value because of the asset.
Related concepts
- Greenfield project
- Brownfield project
- Take-out financing
- Infrastructure debt fund
- Asset recycling
- Value capture financing