The Hindu Business Line : Road freight: An overview

The road freight sector, though carries 70 per cent of the total volume, is disorganised, and transporters with a fleet of less than five vehicles each dominate the market. These players operate on price consideration, without caring for service offerings. This has led to an imbalance in market dynamics.

The logistics sector, according to Datamonitor, is afflicted with the problem of poor infrastructure, such as inadequate roads and bottlenecks in ports. Also, there is the complex regulatory structure. On an average, a commercial vehicle in the country covers 300-350 km a day as compared to 1000-1200 km in Europe and the US. The loss to the economy, therefore, is huge.

Year That Was

The year 2007 has been fruitful for logistics companies across India. There were strong growth-enablers in increased infrastructure investments, phased introduction of value-added-tax, gradual reduction of commercial sales tax and the development of organised retail and agri-processing industries. Customisation, technology and segmentation have been the driving words for logistics companies. With the ban on overloading imposed in 2006 there has been a reduction in the number of fatal accidents on roads.

One of the most noteworthy developments of the year was the repeal of the Carriers Act 1985 and the amendment of the Carriage by Road Bill 2005. With the stipulation of mandatory registration of common carriers across the country, the sector can become better organised and risk and volatility in the business reduced. Another positive feature that indicates the growth of the road freight sector is the rise in the sale of heavy commercial vehicles and the focus on solutions-driven products.

Over the last few years, highway development and upgradation initiatives have also given the sector a fillip.

The year ahead

An ever evolving market, huge investments in infrastructure, increasing levels of disposable income, and dynamic manufacturing and retail sectors combine to create a conducive market for growth of road freight. One can look forward to the adoption of innovative IT-based solutions that will enable smooth flow of inter-State freight traffic. Technologies such as Intelligent Transport System could lead to a paradigm shift in the road freight sector. The Government’s decision to develop 1,000 km of access-controlled expressways is a progressive step that would boost the road freight sector. However, there is an urgent need to integrate tolling systems across the country as multiple toll systems for different BOT stretches result in loss of valuable time.

Innovation will continue to be the buzzword. Logistics companies will continue to incorporate technology into their systems and processes. The demand for logistics services will be boosted by door-to-door logistics, the move to higher-value/lower-bulk shipments, newer commercial vehicles, and the Eleventh Plan thrust on infrastructure.

Another important issue that needs to be addressed is that of road safety, as stressed by the Sunder Committee on Road Safety. With the logistics boom, there is a need to develop more access-controlled expressways, as they ensure free passage for heavy vehicles as well as passenger vehicles.

The sector would also benefit if an integrated road transport policy, beneficial to both the truckers and the authorities, could be devised with the coordination of the various ministries concerned.

(The author is Vice-Chairman and Managing Director, Transport Corporation of India.)