Freight rates may see no relief from drop in Delhi diesel prices

Mamuni Das New Delhi | Updated on August 03, 2020 Published on August 03, 2020

Green Tax in capital may play spoilsport

A near 10 per cent drop in diesel prices in the capital, following the slashing of Value Added Tax (VAT) on diesel by the Delhi government last week, is not reflecting in truck freight charges. Transport experts say they do not expect much change in medium- and long-distance freight rates.

Meanwhile, transport unions are asking the Centre and other States to take a cue from Delhi and lower diesel prices.

Long-distance trucks bypassing Delhi are unlikely to change their routes to fill their tanks in the city for two reasons. “First, the gap in diesel price per litre between Delhi and adjoining States is not high. Second, Delhi charges a so-called Green Tax per trip of ₹1,300 (for smaller and medium size commercial trucks) and ₹2,700 for larger trucks,” SP Singh, Senior Fellow, Indian Foundation of Transport Research and Training’s (IFTRT), told BusinessLine.

Moreover, businesses in Delhi have shrunk, lowering the cargo pie in the capital as many migrants who had returned to their hometowns amid the pandemic are yet to return.

Vehicle purchase decision

The IFTRT, which does not expect a change in medium and long distance freight rates, does, however, expect a shift in purchasing preference of commercial vehicle users towards diesel instead of CNG vehicles in Delhi-NCR, given that CNG vehicles are costlier despite the fuel cost being lower than diesel. That said, vehicle users in Delhi – commercial and private — who’d avoided filling their fuel tanks due to the higher prices will no longer do so.

Fuel accounts for 65 per cent of the operating costs and not only exerts pressure on the transport operations but also foments inflationary trends, thus impacting the common man, said the All India Motor Transport Congress (AIMTC).

Last Thursday, Delhi announced a reduction in VAT on diesel from 30 per cent to 16.75 per cent, which made diesel prices in Delhi cheaper by ₹8.36 per litre.

Competitive market

The AIMTC was cautious about predicting the impact on freight rate given that truckers are operating in a highly competitive, low-demand market. “Fuel tanks of trucks have 400-700 litre capacity. An over ₹8 per litre drop will result in huge savings. In an overall low demand situation, whether freight rates will drop or not will be subject to the cost benefit analysis of each truck,” it said.

The organisation reiterated its demand to the Centre and other States to lower the diesel price. Transporters have been demanding a rollback of fuel price hike, rationalisation of taxes on fuel, uniform rate of diesel across the country and monthly or quarterly revision of fuel prices.

“We request the governments of other States to take a cue from Arvind Kejriwal, Chief Minister of Delhi, and reduce VAT in their States to provide some relief to the transport fraternity and the common man,” AITMC President Kultaran Singh Atwal said in a statement.

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Published on August 03, 2020
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