The Hindu Business Line : Truck rentals slip on VAT confusion

This is quite contrary to the usual trend at this time of year — financial year-end — when truck rentals touch their highs driven by enhanced cargo movement during the period.

According to a report of the Indian Foundation of Transport Research and Training (IFTRT), the truck rentals have been lower during the past four weeks on VAT uncertainties.

Even after a week of VAT implementation, the freight movement continues to remain dislocated, as an agitating trading community and unsettled small- and medium-manufacturing units have virtually put the brakes on inter-State cargo bookings.

For the trading community, the uncertainty over VAT implementation by various State Governments has complicated the situation. Traders have reduced their inventory levels in the last four weeks, said the IFTRT. This, in turn, led to lower truck rentals.

The Institute studied that the impact of VAT on commercial road transportation activity at 30 major trading/trucking centres in the Delhi, Punjab, Uttar Pradesh, Bihar, West Bengal, Orissa, Rajasthan, Madhya Pradesh, Gujarat, Maharashtra, Karnataka and Kerala.

The retail cargo and parcel dispatches dropped by 40 per cent in March compared to the corresponding previous period, said the IFTRT.

In contrast, in March 2004, the truck freightage or rental had gone up 4-5 per cent on major trunk routes.

Typically, since manufacturing companies and their channel partners make their annual closures in March, this period "always generates maximum cargo movement," said the report.

Another indicator of reduced cargo availability is an increase in truck's waiting period for return load, which has touched four-five days against the usual one-two days.

For instance, a truck operating on the Delhi-Raipur sector is making three round trips against four. Hence, the truckers' gross monthly freight realisations have dropped by 25 per cent.

Another reason for the drop in prices could be an increase in the availability of goods vehicles.

During the last five months (November 2004-March 2005) over 1.5 lakh commercial goods vehicles have been registered, raising the national fleet to 33.5 lakhs.

At present 11 lakh trucks are operating on trunk routes against 9 lakh the previous year, the IFTRT adds.

Interestingly, the benefits of a lower rental have not reached the customer. Transport contractors have benefited because they operate on contractual arrangements with corporate consignors, says the report.

Their contract agreement carries a `variation clause' wherein the freight rates are governed by changes in diesel costs but not on the fluctuations in the open market truck freightage.

These contractors usually source 95 per cent of their vehicle requirement from the open market. Thus, points out the IFTRT, now they retain the benefit of increased freight rates (fixed as per November 2004 diesel price hike) from corporate consignors.

The truck rentals on March 10, 2005 were by and large on a par with what prevailed in the first week of November 2004, when the last diesel price hike of eight per cent (Rs 2.12 per litre) was effected.

Truck freightage in the first week of November 2004 and the first week of March 2005 has, by and large, been firm on the major trunk routes in tune with the improved industrial and manufacturing activities.

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