The Hindu Business Line : `It's bumpy ride for road transport cos'

THE road transport companies are in a dilemma. The price of diesel, lubricants, spare parts and tyre is rising and cargo volumes for the industry too are moving up, but freight per tonne or the average yield has been falling, according to Mr Vineet Agarwal, Executive Director of Transport Corporation of India.

As Mr Agarwal points out, the price of diesel, accounting for 45 to 50 per cent of the operating cost, jumped by 121 per cent in the past five years, from Rs 11.49 to Rs 25.44 per litre (average of four metros).

During the same period, chassis price increased by 25 per cent and other input costs from 15 to 50 per cent. Capping it all, there has been a rise in the wages of drivers and additional cost incurred by way of new toll taxes. However, the freight rates, as measured in terms of road freight index (RFI), increased by a meagre 19 per cent. RFI during the period increased from 103 to 123.

He attributes this mismatch largely to the stiff competition from the unorganised sector. Some increase in costs has been absorbed by lower finance charges, use of higher capacity vehicles, overloading and fuel adulteration.

The recent 4 per cent hike in fuel prices, Mr Agarwal feels, is unlikely to have any impact on the road freight rates. First, the hike has been announced at a time when the market demand is not at a peak this being the monsoon season. Also, the hike will encourage overloading and aggravate the problem of pollution. Since the kerosene price has been left untouched, adulteration with kerosene will rise. The cost, therefore, will have to be absorbed partly by fleet owners and partly by transport operators.

He points out that in the past one year the diesel price increased by 19 per cent, in the past two years by 29 per cent, in the past four years by 47 per cent and in the past five years by 121 per cent.

Accordingly, RFI should have gone up by 55 per cent but that did not happen. The actual increase was only 19 per cent. The components such as toll tax, rising chassis prices due to high cost of steel and conversion of engines into Euro 2 (and Euro 3 from April 1,2005) will only add to the woes of the transport companies, Mr Agarwal adds.