Irregular monsoon puts up roadblock for truck industry

Written by Yogima Seth | New Delhi | Updated: Jul 16 2009, 04:54am hrs
At a time when the truck industry in the country is already reeling under the pressure of economic slowdown, uneven monsoons have played a spoilsport for the industry. With scanty rainfall across most parts of the country, especially the rural belts of Punjab and Uttar Pradesh, the cargo movement has dropped by 20-30% in the last fortnight and this is expected to have a rippling effect on sales of trucks despite the huge investment announced by the government in infrastructure projects in the Budget.

The companies thus affected would be major truck manufacturers like Tata Motors, Ashok Leyland, Eicher Motors and Asia Motor Works.

Though there has been a significant increase in allocation for infrastructure projects and development of national highways in the Budget, it is expected that truck sales would not rebounce at least for the next two quarters because of scanty rainfall, said Indian Foundation of Transport Research and Training (IFTRT) senior fellow and coordinator SP Singh.

According to Singh, 40% of the total cargo revenue of approximately Rs 3,25,000 crore a year comes from transport of agriculture products and since the crop has failed to meet expectations, there has been a 20-30% drop in the cargo movement across the country. This is impacting the demand for trucks in India and may eventually result in another dismal quarter for the truck industry.

Moreover, the weak monsoon and consequent sowing of lesser area by farmers has opened a big opportunity to hoarding of essential food items by wholesalers and this has led to a drop in cargo offering to truckers, added Singh.

According to IFTRT, total truck sales in the country declined by 38.2% in the first quarter (April-June) at 36,248 units as compared to 58,681 units during the corresponding period last year. Currently, there are 4.4 million trucks in the country out of which 17 lakh ply on national permits every day.

This comes on the backdrop of 6% reduction in excise duty in December last year, 50% depreciation allowances announced in the stimulus package in January and 23% increase in allocation under the National Highway Authority of India (NHAI).

There has been no tangible change in truck sales post the two stimulus packages as the reduction in excise duty was not effectively passed on to the consumers and 95% of people in the business pay presumptive income tax because of which they could not avail the benefits of depreciation allowances as provided by the Centre, said Singh.

Even the Society of Indian Automobile Manufacturers show a decline of 12.87% in total commercial vehicle sales (trucks and buses) in the first quarter of the current financial year at 96,835 units as compared to 1,11,136 units in the corresponding quarter of the last financial year.