Slow recovery in manufacturing, infrastructure and mining sectors and over-dependence on the agricultural sector for freight have taken a toll on the business of the truck fleet operators across the country.
Since December 2014, truck fleet operators have been replacing their old trucks with new ones in expectation of a pick-up in infrastructure, mining and manufacturing sectors. As a consequence, the heavy and medium commercial vehicles started to register increase in monthly sales after one-and-a-half years of slowdown. The MHCV segment continued to grow by 24% in May 2015.
With utilisation levels hovering around 60-70%, truck fleet operators are apprehensive about the future as they have to repay their vehicle loans that have been extended by banks and non-banking financial institutions. Most truck owners — especially the small ones with less than 10 trucks — were forced to reduce freight rates as they could not allow truck to remain idle.
Navin Kumar Gupta, a truck fleet owner and secretary general of the All India Motor Transport Congress, said that the increase in output in the manufacturing sector and pick-up in the infrastructure sector have not translated in significant increase in cargo for the fleet owners.
“We have seen good cargo from the agriculture sector due to the availability of summer fruits but our operating cost has increased manifold. Freight charges have not increased substantially. Besides, the 2% tax deducted at source is taking a toll on our profit margins. We also have to pay EMIs for the loans that we have taken,” added Mehta.
Fleet operators made heavy losses in March and April as unseasonal rains damaged ready to harvest crops in the western and northern India. As a consequence freight charges did not increase during the period. Analysts say that there may be a lull period when mangoes go off the market and fleet operators will have to wait for the apple crop in August for reasonably good supply of cargo
from the agriculture sector.
Vivek Arya , managing director of Rhenus Logistics which has a capacity of 150 vehicles, told FE that there is huge gap between demand and supply of cargo in certain places.
“We do not expect any growth in terms of growth in the freight rates and profit of fleet operators in the next one year. If there is good availability of cargo then freight rates are high but lack of return load is hurting the sector, “ explained Arya.
Fluctuation in diesel prices every month also hurt the fleet operators as they have to sign a contract with their customers regarding freight charges and any increase in diesel prices after that hurts the fleet operators.
“There has been no significant growth in the freight. Fleet owners are investing on expectation of things to pick up in infra and manufacturing sectors. Though start of mining will also provide extra cargo, there will be some pressure during the monsoon. But things will turnaround during the festive period,” said Amit Kaushik, associate director, IHS Automotive.