The Indian road transport sector carries goods worth $150 billion a year, which means about $12 billion of business is done per month. The truck fleet utilisation had peaked to 85% in March, which was better than the pre-Covid levels, but has now dropped to 70%.
Infrastructure is the backbone of a nation’s economy. It functions like arteries and veins in the body that keep the blood flowing throughout. Logistics sector can be that part of the infrastructure. Without a robust and efficient logistics infrastructure, industries will find it hard to ensure smooth movements of goods across the value chain. The trucking industry- considered to be the backbone of India’s economy- has been battered by the imposed lockdowns at the onset of the second wave of the pandemic in India especially after seeing steady recovery over the last couple of months from the first wave. The fresh wave of Covid-19 cases sweeping the country and the resultant lockdown measures implemented by several states have already started hurting transporters. The trade is estimated to suffer $2.4 billion (Rs 17,800 crore) of revenue loss in April alone. This could also affect GDP growth, which is projected at 10.5% by the central bank for this fiscal year.
The Indian road transport sector carries goods worth $150 billion a year, which means about $12 billion of business is done per month. The truck fleet utilisation had peaked to 85% in March, which was better than the pre-Covid levels, but has now dropped to 70%. Truckers will be hard-pressed to pay back their EMIs. Transportation of goods through roadways slowed during April. The average number of daily e-way bills generated in April so far is around 2 million as compared to 2.3 million in March. These bills are necessary for moving goods from one state to the other via road. Besides goods, people’s movement has also reduced. Organised Trucking can put together the pieces of a fragmented industry by augmenting performance and visibility through tech-infusion and bolster its credibility in the months to come.
In an exclusive conversation with the Financial Express Online Anjani Mandal, CEO of Nandan Nilekani-backed startup 4TiGO Networks and Logistics shares his insights into the ground realities of the infra and logistics industry as it stands, how the second wave has impacted business, projections for 2021 as well as the impact on truck drivers and fleet owners and how things were steering back to normal. Excerpts:
How was 2020 for the logistics industry? Can you trace the recovery post the initial lockdowns in 2020 up until March of 2021?
2020 has been one of the single most challenging periods for logistics in our collective memory. The year started with the cascading impact of the auto sector slow down of late 2019. Auto is one of the most critical sectors for the logistics industry because of the breadth of ancillary industries which feed into it and the vast geographic spread.
The focus shift to an organized sector by the Regulatory did not see many takers for transition from the unorganized sector. The pandemic was the last proverbial straw that saw total despondency among the small businesses. It helped temporarily that they had a moratorium for EMIs & Licenses till October and a couple of months additional while the matter was awaiting final ruling. Most small fleet-owners exited thereafter, sold off the trucks or just returned trucks to the Financier.
The Supply-Demand equation was completely altered by Dec 2020 – even as the small traditional Transporters continued to exit when they got an opportunity. Freight rates are up 30%+. Transition to Rail by many sectors is clearly building up – expected to be 50% from 30% pre-pandemic. The Punjab / Haryana Farmer blockade had a major impact in the North during Q1 2021. Recovery of organized players on most parts outside NCR commenced in Jan 2021 but came to a sharp drop by the middle of Mar 2021 as the pandemic rose to alarming levels in Maharashtra & Kerala.
How has the second wave impacted trucking and transportation? Will truckers be hard pressed to pay back EMIs?
This time Corporate is better prepared to handle labour shortage & increased incidences within the factory – process is defined & symptoms are known. However, the rapid spread has changed the priority of all – (a) employee safety dominates (b) even Drivers hesitate from undertaking long distance trips – due to risk, as well sudden lock-downs and absence of return load.
Consequently, Long-distance route trucks are in short-supply and this is not expected to change soon due to risk & lock-downs. Reduced capacity in factories at short-notice, which in turn is Covid related or labour shortage related, worsens the supply demand situation further. The regional concentration impacts all return loads to these regions.
The second wave has come in and broken a sector that was on the way to regrouping from the first wave. The set of small and medium players who managed to survive the first wave and stayed put, are being forced out of the sector for good this time. Truckers are hard pressed to pay back the EMI as the short term financial relief package for the sector is not present unlike the last time. Many are selling their trucks off at the first chance they get, or surrendering them to the finance companies. The follow on impact of this will be more of the loan origin companies who have no collateral to recover their investment from.
How have the new restrictions and lockdowns impacted Fortigo’s business? What does Fortigo’s growth look like this year?
As a Digital Logistics player, we had little impact in the 1st wave after the regulations for goods movement were in place by mid-May. However the case is different in the 2nd wave. We were on our way to grow 2.5x in the middle of 2019, but the slow down in the auto sector and lockdowns have reduced our pace. We are reassessing our growth numbers for the year as the severity of the second wave of lockdowns were not expected. Most Large customers have been rational and reasonable and have paused enforcement of negative contract terms for delays and non-placements. There has been a drastic adoption of digital technologies to enable no-touch and paperless operations. eGCN & eInvoices & ePoDs acceptance is not yet 100% but have been accepted by most reasonable customers. Driver shortage continues to be extreme across the country and several trucks engaged in medium-distance are also lying idle. April, which is usually weaker than March every year by 20% in terms of demand for trucks, was lower by 30%. May will be at 50% of March. The South and East are in complete lock-down for industry as well. The Punjab / Haryana Farmer blockade had a major impact in the North Since Q1 2021. Kerala has had relatively higher numbers through September to date except for three weeks in March after which it has risen sharply. Maharashtra has been in the grip of pandemic since 1st week of March and is finally recovering in May.
Have organized and unorganized players been impacted the same way?
All players are impacted, organized or unorganized. The organized players, as expected, always have an edge over the unorganized players but the impact has been distressing to all segments of Trucking outside of e-commerce.
How has Fortigo managed to pivot through this crisis? Are digital logistics solutions really the way forward for the industry?
With the strong relationships and the resilience we have, we were able to adjust our focus on sectors which were working and reduce our dependence on sectors which had reduced demand. We have set realistic expectations about fulfillment and supply-demand situations with our customers, and that is helping us continue our relationships. We are a technology enabled new age player in the industry. The pandemic showed how important building resilience into your operations is critical, and how digitisation is at the heart of it. From the first lockdown, it was clear that organisations who were digitised had a clear advantage over the others, and it has played out in the same manner through the first and second waves. Digital logistics adoption is now an inevitability for the industry.
Fortigo continues to be a Digital Logistics services provider (Tech-enabled). Two major initiatives have been added during the ‘pandemic era’: (a) New high-volume industry segments that are best facilitated with Technology enablement has been added (b) A separate entity providing Technology solutions for End-Customers / Shippers to Manage Transportation by integrating the Trucking eco-system digitally has been launched. The solution provides accessibility “AnyTime – AnyWhere” for every user through multiple mediums as appropriate – including from their mobile. It is a single integrated solution that enables Transacting, Controlling, Analyzing as well as Improving & Optimizing Logistics performance. This would be as much as 20% over the 1st few quarters of implementation.
What do the coming months have in store for logistics? By when do you see recovery and to what extent? Any expected trends?
The current situation is likely to continue till post-monsoon and is predicted to hit peak this month with a slow decline. Pent-up demand for all core-industry as well as for all sections of FMCG products – beyond essentials – will go through a sharp uptick. Tamil Nadu and West Bengal will in all likelihood have recoveries in a delayed cycle of 2-4 weeks owing to the pandemic situation. All our larger engagements in FMCG, Industrials & Core industry have given us advance intimation of such expected increases. Auto-industry recovery is however likely to be a laggard for a while.