A decline in diesel prices and lack of cargo from the manufacturing sector led to truck rentals falling by as much as 4.5% month-on-month...
A decline in diesel prices and lack of cargo from the manufacturing sector led to truck rentals falling by as much as 4.5% month-on-month in February, according to data available with the Indian Foundation for Transport Research Foundation (IFTRT).
Truck rentals could have fallen further but adequate supply of fruit and vegetable cargoes prevented this from happening.
The reduction in freight charges are likely to reduce retail prices of goods and commodities, like fruits and vegetables, which are likely to benefit end consumers.
Freight charges on the Bombay-Delhi route, the busiest in the country, fell by 3.8% to R58,200 per round trip. Transportation cost in the Delhi-Guwahati route, the most expensive in the country, fell 4.43% to R99,200.
On February 3, diesel prices were reduced by R2.25 per litre as international crude prices dropped, which resulted in declining truck rentals on major routes. Diesel prices were increased by 61 paise per litre in the middle of February but truck operators refrained from passing on the increased cost to customers as there wasn’t an adequate supply of cargo.
Sanjay Singh, senior research fellow at the IFTRT, says that though food inflation has softened, cost of manufactured goods is still high, which is impacting availability of cargoes for truck operators.
“Activity in the manufacturing sector, which provides 70% of total cargo, did not show any signs of revival. But at the same time the cost of operating truck fleets decreased over a period of time, so truck owners passed on the benefit to consumers,” explained Singh.
Fleet owners also appear to be gearing up to replace older trucks with new ones as the economic activity is expected to pick up going forward.
According to Umesh Revankar, CEO, Shriram Transport Finance, truck fleet owners are buying vehicles in an anticipation of a pick-up in mining activity following the completion of an auction whereby coal blocks are being allocated metals, mining and power companies afresh. The mining of iron ore in the country, which had come to a virtual halt over the last couple of years, is also slated to pick-up with the government working towards framing a clear policy governing all mining activities in the country.
“Our truck finance business has gone up 7-8% quarter-on-quarter in the October-December period. There has been some improvement in fleet utilisation as bulk goods transportation has gone up. Growth in heavy vehicle sales will continue in the next year as well,” Revankar said.
Though the sale of medium and heavy commercial vehicles has increased, fleet operators say that are certain roadblocks like toll tax and entry taxes in different states, which are impeding optimum utilisation of trucks, according to Navin Kumar Gupta, general secretary, All India Motor Transport Congress.
Though benign in February, a substantial hike of R3.70 per litre in diesel prices on March 1 is expected to increase truck rentals by 4.5% to 5.5% for the current month, which can potentially push up prices of essential commodities.