1. Truck rentals slide up to 3% in July on less cargo, cut in diesel price

Truck rentals slide up to 3% in July on less cargo, cut in diesel price

Reduction in freight is good news for consumers as it will bring down inflation but the truck operators will come under immense pressure as utilisation of trucks will come down, which will take a toll on the profit margins.

By: | Mumbai | Published: August 29, 2015 12:27 AM
trucks

Reduction in freight is good news for consumers as it will bring down inflation but the truck operators will come under immense pressure as utilisation of trucks will come down, which will take a toll on the profit margins.

Sudden drop in availability of cargo from the agriculture sector and reduction in diesel price by Rs 2.71/litre pulled down truck rentals by 2-3% in July, a report from the Indian Foundation for Transport Research and Training (IFTRT) showed.

The subdued availability of cargo from manufacturing, infrastructure and mining sectors continued in July as truck fleet owners still rely on agricultural output for freight.

Reduction in freight is good news for consumers as it will bring down inflation but the truck operators will come under immense pressure as utilisation of trucks will come down, which will take a toll on the profit margins.

Currently truck fleet utilisation is between 65-70%, which was expected to increase to 80%.

“The arrival of fruits and vegetables to APMCs across the country has dropped by 10%-15% and trucks are failing to get return load for four to five days,” said Sanjay Singh, senior fellow, IFTRT.

Freight rates in the busiest route — Mumbai to Assam — decreased by 2.5% to R80,000 per round trip while the rentals in the most expensive route — Delhi to Guwahati — dipped by 2.5% to R138,000 per round trip.

According to IFTRT, reduction in diesel price from August 1 by R3.80/litre has further reduced rentals by 3-3.5% in August. This would be the third consecutive months in which freight rates would fall as result of less cargo and cut in diesel price.

“Diesel prices are expected to fall further in coming four to six weeks by 4%-5% and this will be followed by the festival season where availability of cargo will increase. This will increase the cargo movement and consumer spending from the middle of September and will help stabilise the truck rental market across the country,” said IFTRT in a report.

According to the industry experts, cargo from the mining sector may improve once the activity in states like Jharkhand, Odisha, West Bengal, Maharashtra and Karnataka starts post-monsoon, which will help increase sales of tippers.

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