1. Cheaper diesel, higher truck sales fail to lower freight rates

Cheaper diesel, higher truck sales fail to lower freight rates

Despite diesel prices falling by almost Rs 6 per litre in last 30 days, truck rentals are yet to fall.

By: | New Delhi | Published: November 5, 2014 2:31 AM

Despite diesel prices falling by almost Rs 6 per litre in last 30 days and heavy truck sales rising, truck rentals are yet to fall, said a report by an independent transport research agency, Indian Foundation of Transport Research and Training (IFTRT).
This is likely to prove a major challenge for  the government looking to battle high inflation, because unless transport costs fall, prices of food and non-food items are unlikely to see any moderation.

“Contrary to the expected 3-4% reduction in truck rentals on trunk routes, freight charges remained firm and unchanged in October on the back of increased despatches to APMCs of fruits and vegetables, and brisk flow of cargo from manufacturing sector on account of strong spending by consumers due to festival season and short supply of trucks in the last 7-10 days of October due to Diwali and Chhat Puja,” said the IFTRT report.

Taking a cue from the falling global oil prices, the oil marketing firms on October 18 announced a Rs 3.37/litre cut in diesel prices — down from a historic high of Rs 58.97/litre. This followed the deregulation of diesel prices by the government, a practice already done for petrol prices in June 2012. A further cut of Rs 2.25/litre to diesel prices was made on October 31.

Lower supply of trucks and high demand for goods movement are said to be the reasons why freight rates have not dropped. About 10-15% National Permit truck fleet is said to have been diverted to the Kharif Crop procurement of paddy, cotton, pulses, oil seeds and other cereal items on intra-state local movement.

“The average 25-30% drop in truck sales in last 6-8 quarters has reduced the truck fleet on National Permit Circuit and at the local truck operation on intra-state movement. The 17 to 20-year-old trucks numbering 75,000-1,00,000 have been diverted voluntarily by truckers to the scrappage market as these vehicles were unviable and required extensive regular maintenance. Thus, in last two years, despite a weak economy, the truckers have survived due to shrinking national fleet,” the report said.

Heavy and medium truck sales, which have dropped by 40% in the last two years, have been rising in the past few months. In September, they grew 23% YoY to 19,035 units.

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