Freight rates in January come off up by to 2%

Mumbai | Published: January 17, 2019 2:14:05 AM

Despite an increase of Rs 2 per litre in the price of diesel over the last 10 days, truck rentals have come off by 1.5-2%.

freight rates, trucksIn December, the diesel price fall of Rs 4.86 per litre had resulted in truck rentals coming off by 5-6%, according to IFTRT, which tracks truck rentals across the country.

By Kritika Arora

Despite an increase of Rs 2 per litre in the price of diesel over the last 10 days, truck rentals have come off by 1.5-2%.

Freight rates are a good indicator of broad-based demand. An increase in freight rates can be considered as a good proxy for broad-based growth in economic activity in times of stable inter-modal mix given limited barriers to adding supply.

This has been the case through much of CY2018, over which freight rates had strengthened.

Umesh Revankar, managing director, Shriram Transport, observed that in the first 15 days of January, demand for commercial vehicles was lukewarm. “However, demand seems to be looking up,” Revankar said.
However, factory output growth slumped to a 17-month low of 0.5% in November 2018, plunging from 8.5% in the same month of the previous year. The latest Index of Industrial Production (IIP) print was also lower than the upward revised 8.4% year-on-year growth recorded in October 2018.

The main reason for the slump in factory output growth in November 2018 is the poor show from the manufacturing sector, which contracted 0.4% in November 2018, against the robust 10.4% growth seen in November 2017.

In December, the diesel price fall of Rs 4.86 per litre had resulted in truck rentals coming off by 5-6%, according to IFTRT, which tracks truck rentals across the country. For instance, on the Delhi-Mumbai-Delhi trunk route as on January 1, it wasRs 88,000, down 5% compared with December. Similarly, for the Delhi- Guwahati-Delhi, the rental was Rs 1,37,500, down 6% over the previous month.

Vinod Dasari, managing director, Ashok Leyland, had observed recently that the year-on-year fall in sales of commercial vehicles (CV) in December, could be attributed to a high base.

Between April and December, the growth in production of CVs was a strong 26% year-on-year.

According to IFTRT, the supply of agriculture and horticulture from production centres to APMCs across the country had gone up by 10-15% in December.

However, sales of consumer durables, FMCG products and general merchandise from factory gates had been subdued. SP Singh, senior fellow and coordinator, IFTRT, said dealers he had spoken with had reported that enquiries for CVs had fallen fairly sharply. Moreover, a higher turnaround time for trucks was adding to logistics costs.

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