Road rage

The rumblings of discontent from Indian goods transporters are now threatening to escalate into a full-blown strike. Truckers are protesting recent regulatory changes that promise to squeeze profitability in this already thin-margin business. Among the laundry list of issues flagged by the industry body are the steep hike in third party insurance premiums, hikes in penalties in the new Motor Vehicles Act, expiry of registration dates for BS-III vehicles, opaque functioning of road transport authorities, and the proposed vehicle scrapping policy. While there can be no case for compromising on road safety or environment by reducing penalties for truckers, or extending the registration date for BS-III vehicles, it is important for the Centre to pay heed to the more pragmatic demands. Despite being the backbone of India’s logistics network, the trucking industry has long been neglected by policymakers due to its unorganised and fragmented nature.

The immediate trigger for this strike seems to be IRDA’s decision to hike insurance premiums for third party vehicle covers by 40-50 per cent in its latest annual review. It is true that heavy vehicles have been saddled with the steepest revision in tariffs, and given that third party cover is mandatory, transporters have no option but to pay it. The truckers’ demand that tariffs be decided through a Tariff Advisory Committee, rather than unilaterally, is also sound. But to be fair, steep hikes in the third party premium rates have been necessitated by high claims ratios over the years which have rendered the business loss-making for insurers. General insurers are also compelled by law to offer third-party covers with unlimited liability, while tariffs are still fixed by the regulator. However, having effected hefty tariff adjustments for the last six years (truckers claim their premiums are up eight-fold), it is now time for IRDA to consider de-control. The removal of price controls may not immediately reduce premiums, but the trend in other categories suggests that over time, competitive forces will kick in to moderate tariffs.

In this context, the truckers should welcome the new Motor Vehicles (Amendment) Bill 2016, recently green-flagged by the Cabinet. Once passed into law, apart from levying hefty penalties for drunk driving, overloading and safety violations, it also promises a rollback of Permit Raj in the road sector. Online vehicle registration, Aadhaar-based licensing and a national vehicle registry all promise to reduce the discretionary powers of the state and curb rampant corruption. The Act also proposes a cap on the contentious third party liability for insurers. On the whole, the truckers’ strike also seems to be a response to the many disruptions the industry is being confronted with within a short time span — from demonetisation to the upcoming Goods and Services Tax. The Centre must reach out to reassure transport operators that most of these changes, though painful in the short term, will result in substantial long-term payoffs.

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