Freight rates, truck sales dip on muted industrial activity

Jan 21 2013, 01:17 IST
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SummaryThe three major road corridors in the country witnessed a 3% average fall in freight rates in calendar year 2012, pointing to sluggish demand in goods transport that led to an over 20% dip in truck sales for the period.

The three major road corridors in the country witnessed a 3% average fall in freight rates in calendar year 2012, pointing to sluggish demand in goods transport that led to an over 20% dip in truck sales for the period.

The freight rates (per 9 tonnes) in the Delhi-Mumbai sector dipped 8%, Delhi-Kolkata was down by 2% and Delhi-Chennai by 3% in 2012, Bloomberg data showed. Muted industrial activity and delay in agricultural output are seen as the reasons behind the fall in rates.

Freight movement has a direct link to the sales of medium and heavy commercial vehicles (M&HCVs). According to a January 9 report by the Society of Indian Automobile Manufacturers, there has been a 22.2% fall in sales in the M&HCV segment in April-December 2012 to 1.64 lakh units.

Tata Motors, Indiaís largest CV maker, witnessed a 28% fall in its goods carrier sales during April-December 2012.

Tata Motors sold 95,864 units in April-December 2012 as against 1.33 lakh units in the same period last year.

Ashok Leyland saw a 12% fall in its truck sales between April-December 2012. The company sold 35,965 units in April-December 2012 against 40,890 units last year.

"We do not see any meaningful addition to fleet capacity unless there is a revival of investment and subsequent capital formation," said Sudarshan Shreenivas, associate director (corporates) at India Ratings and Research, part of rating agency Fitch.

The Delhi-Ahmedabad route, on the other hand, beat the trend to register a 21% increase in freight rates. "The northern region, including Delhi and Ahmedabad, has been better off in terms of negotiation of freight rates during 2012 compared to the south of India, where overall industrial environment and power shortage impacted the freight movement," said Shamsher Dewan, a senior analyst at ICRA.

Truckers were unable to raise freight rates in tandem with the increase in the price of diesel in the year as industrial activity remained muted, explained Shreenivas of India Ratings. The price of diesel in Mumbai rose 16% between June and December while in Delhi, it was up 13.7% since August.

However, the partial deregulation of diesel prices by the government on Thursday is expected to lead to a moderate upward movement in freight rates in the short term, say consultants. A likely revival in sectors like cement, steel and agricultural products is also expected to come as a breather for truckers.

The Indian Road Freight Index, collated by Transport Corporation of India, forecasts January

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