No immediate recovery in sight for trucking industry hammered by lockdown

Pratim Ranjan Bose Kolkata | Updated on April 29, 2020 Published on April 29, 2020

Truck drivers served food on a highway at Solapur, Maharashtra

If the demand for industrial goods doesn’t make a dramatic recovery in May-June, India may see a shakeout in the truck transport sector in about six months. Immediate recovery, however, seems difficult in the face of an anticipated second wave of Covid-19 breakout.

The road transport sector is largely unorganised. The shakeout may do some long-term good to the sector that is suffering from unbridled competition and the resulting malpractices, but the initial impact will be felt on low-wage job opportunities, said experts.

Value-chain disruption

The problem is apparent. According to the Indian Foundation of Transport Research and Training (IFTRT), India has 52 lakh trucks, of which 14 lakh undertake long- and medium-haul journeys on a national permit. (Another 20 lakh trucks ply inter-State while the rest travel within States.)

As of January-February, before Covid broke out in India in a big way, the fleet utilisation of the long- and medium-haul segment — the backbone of the trucking sector — was around 65 per cent. The lockdown brought the utilisation down to a third, said SP Singh, senior fellow at IFTRT.

While the movement of agricultural produce and essential items continued in full swing, industrial (non-essential) goods transport, which accounts for 60 per cent of the truck cargo, came down drastically.

Production can only peak when consumers go shopping and distribution channels operate.

To add to the problem, the 2.5 lakh booking and delivery offices of transporters have not opened as yet. “The truck is a component in the entire value chain that includes booking, delivery, forwarding receiving etc. The chain is disrupted,” said Singh.

Shakeout imminent

Part of the blame for low movement also goes to a shortage of labour at the loading and unloading ends and the dearth of drivers.

Anjani Mandal, co-founder and CEO of Fortigo Logistics Network, which represents the organised sector and is into ‘uberising’ the trucking business, said that despite low bookings one-third of his cargo movement suffered delays due to labour shortage.

Mandal is hopeful that if the lockdown is duly enforced by States and the spread of the disease is contained, as per projection, industrial cargo movement will increase in the next two weeks, improving fleet-utilisation to “50 per cent of normal times”.

But that will not be enough to prevent a jolt.

The pressure will star building from July, when EMIs — estimated at ₹40,000-55,000 a truck — will be due after the three-month moratorium ends, in June. The impact will be the highest on small-owners, with one to three trucks each.

Their earnings suffered during the economic slowdown in 2019. Now Covid has made their life doubly difficult. “The impending scenario may open scope for consolidation with roughly 40 per cent of trucks going out of business by September,” said IFTRT’s Singh.

Reorganisation necessary

Industry watchers had for long been hoping for a shakeout to rein in unbridled competition, which is seen to impact returns and give rise to malpractices such as poor labour standards and overloading.

Against the prescribed minimum wage of ₹14,500-16,500 a month, drivers are offered barely ₹5,000-7,000 in fixed wages, observed Singh. Their total earnings go up to ₹12,000-13,000 a month depending on managing illegalities — like overloading — on behalf of the truck-owner.

Such low wages represent a poor opportunity cost when the drivers decide not to drive; thus they prefer to stay at home amid the lockdown.

While how the pandemic will pan out is not clear, organised players with access to better systems will enjoy an advantage once it ends, and there is a cash crunch, said Fortigo’s Mandal.

The government has already created a framework through GST, electronic waybill, etc for faster movement of cargo, said experts. It would now be a test of the operational efficiency of the business. Operators with lower overheads and reduced cash cycles will have an edge.

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Published on April 29, 2020
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