Following a demand from transport associations, the Road Transport and Highways Ministry has reminded various States that it is possible for them to fix a minimum floor price for cargo movement. This is provided for in the Motor Vehicle Act.

Simply put, freight rate is the amount charged by truck drivers for moving goods between two different places.

States are free to fix a range of minimum and maximum rate for freight and several forms of passenger transport, the Road Transport Ministry has reiterated in a letter to States on July 10.

The Road transport Ministry issued this guidance citing representation from transport associations that asked the Ministry to fix the minimum freight rates in view of “economic turbulence, weak demand and other factors”, according to an advisory.

Even though a section of transporters had sought government intervention to fix a minimum freight rate limit, the move will create a rift in other sections of transporters, say transport experts.

SP Singh, Senior Fellow, Indian Foundation of Transport Research and Training (IFTRT), told BusinessLine that this is difficult to implement as it interferes in the concept of letting the market forces operate in a free and fair manner. Government intervention in fixing freight (for goods movement) is totally unwarranted, he said adding that some States like West Bengal had tried to implement this but could not.

Also, the method of defining freight rate is difficult in the present context when the contract between large and small truck players, large and small customers vary based on duration of contract, volume of goods, size of trucks, and several other factors.

 

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