The Hindu Business Line : Transportation costs up 10-12 pc: IFTRT

Even as the cement industry blames rising transportation costs as the primary reason for the recent price hike, a transport research body has said that the freight costs by road has moved up by 10-12 per cent in the last six months against industry claims of 30-40 per cent and even higher percentages.

The per bag (50 kg) transportation cost after taking into account the movement of cement by road and railways, does not go beyond Rs 2-3 for different cement producers, said the Indian Foundation of Transport Research and Training (IFTRT) in a statement.

Transportation cost

The transportation cost by road and rail, is 15 per cent of the total manufacturing and distribution cost of the cement manufacturing units, it said. Thus, a 10-12 per cent escalation in truck rentals adds less than two per cent of its weighted cost impact on the total price.

The IFTRT team, during January and February 2006, visited cement manufacturing plants in Himachal Pradesh, Punjab and Madhya Pradesh to study the related issues. The team interacted with cement manufacturers, distributors, transport contractors, truck operators and State administrations apart from a visit to Railway cement sidings.

The cement price was hovering around Rs 130 per bag (of 50 kg each) in October 2005, whereas it is now priced at Rs 210 per bag.

Overloading

The cement industry in its justification of repeated price increases has cited the Supreme Court Order (of November 2005) banning overloading of trucks and thereby increase in transportation cost as primary reason.

However, IFTRT alleged that the industry has been misquoting the Supreme Court Judgment by giving an impression that overloading of trucks prior to November 9, 2005 was a regular legal activity for movement of cement.

The Central Motor Vehicle Act, 1988, disallowed overloading earlier as well, and the Apex Court has merely directed the state governments to strictly enforce the provisions of the Act, it said.

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