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Dubai Salik to introduce ‘dynamic pricing’

Dubai’s Salik to sell 20% shares via IPO

Dubai Salik

Dubai Salik

Salik, the toll operator that announced its initial public offering (IPO) on Monday, may consider implementing ‘dynamic pricing’ at its road toll gates in an effort to reduce congestion and boost revenue.

A dynamic pricing system is one that will spike tolls during rush hours, on certain lanes, and at the busiest times.

“The Roads & Transport Authority could implement dynamic pricing through optimizing the toll rates depending on the time of the day, for example, by charging a higher toll fee for specific lanes or during peak hours,” according to Salik’s IPO announcement.

Salik’s dynamic pricing

Dubai’s Salik isn’t the first to implement this ‘dynamic pricing’ system – it’s already in place in Singapore and Dallas, USA.

Dubai Salik

“Currently, we have fixed a fee of Dh4 for Salik. But there are other dynamic systems around the world that charge more during peak hours than off-peak hours. That is called dynamic pricing. This is based on a transportation study that will be conducted by the RTA and Salik to achieve the common goal of seamless transportation in the emirate. All this will be subject to approval from the Executive Council of Dubai,” said Abdul Muhsen Kalabat, vice-chairman of the Salik Board of Directors.

“Dynamic pricing structure is related to adopting any changes that come in the future, including flexible tariffs or increasing the number of gates to manage traffic,” said Ibrahim Sultan Al Haddad, CEO of Salik.

Mattar Al Tayer, chairman of the company, said any increase in the number of gates or tariffs would be based on studies that are conducted by the RTA and the company. The Executive Council of Dubai will take a final decision in this regard.

“New toll gates can also be added subject to a decree issued by the Chairman of The Executive Council of Dubai, and after RTA conducts a comprehensive traffic study in coordination with Salik,” the Executive Council of Dubai added.

Dubai to Sell 20% Stake in IPO of Road-Toll Operator Salik

Salik on Monday said it will sell 1.5 billion shares or 20 per cent of the stake through the initial public offering (IPO) to raise around Dh3.67 billion ($1 billion) for the government, as part of the city’s ongoing efforts to boost trading volumes. It is expected that the company will be listed around September 29 on Dubai Financial Market (DFM).

Dubai plans to list 10 state-owned firms in a bid to combat years of falling trade volumes and compete with the bourses of neighboring Abu Dhabi and Saudi Arabia.

Individuals and other investors can subscribe to Salik shares from September 13 to September 20.

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New toll gates

There are plans for more toll gates coming in the future, but gates typically take around nine to ten months to become operational.

The company said in its prospectus that it will “continually invest in its operations in order to seamlessly integrate new gates into its existing portfolio, allowing the company to immediately bring them online once construction is complete. A new gate typically takes approximately nine to 10 months from conception to become operational.”

The new gates are typically announced three to six months prior to operation. The company expects the new gate will cost Dh20-30 million, depending on the number of lanes at the selected location as the amount is paid over 10-12 months. The company plans to install solar power capabilities in all existing toll gates over the next few years.

Salik means “open” or “clear” in Arabic. Salik is an automated system introduced in 2007 to offer seamless connectivity between the emirate’s main roads.. Each time a vehicle passes through one of the city’s eight toll points, 4 dirhams ($1.09) are charged to a prepaid account, eliminating the need for cash or toll booths. 

Currently, there are eight toll gates and three million registered vehicles, out of which 1.8 million are registered in Dubai.

They are located at Al Barsha, Jebel Ali, Al Mamzar North, Al Mazar South, Al Safa, Al Garhoud, DXB Airport Tunnel and Al Maktoum Bridge.