Truck freight rates fall nearly 3% in Aug on weak cargo flow

Truck rentals registered a fall of 2.5-3 per cent on trunk routes during August due to inadequate cargo. Freight rates fell 1.5 per cent each in July and June.

“Truck rentals fell three per cent during first three weeks of August due to weak cargo from agri sector although manufacturing cargo was moderately stable. Reduction in diesel prices by ₹4.01 per litre after two price revisions also had an impact on the rentals,” according to Indian Foundation of Transport Research and Training (IFTRT).

“However, last week of August saw some sudden jump in fruits and vegetables cargo and that helped truck rentals to stabilise. So the freight rate drop was 2.5-3 per cent as against the expected fall of 4-5 per cent for the month,” said S P Singh of IFTRT.

Truck rental on Delhi-Mumbai-Delhi round trip on a 15-tonne payload truck was ₹ 85,100 on September 1 when compared with August 2 rate of ₹ 87,300. Delhi-Chennai-Delhi round-trip saw three per cent fall to ₹ 133,500 from ₹ 137,600 and Delhi-Kandla-Delhi trip rental fell by 2.5 per cent to ₹ 66,600 from ₹ 68,300.

While diesel price was hiked by ₹ 2.67 per litre September 1, there could be a price revision by middle of this month as there has been a slump in international crude price in the past few days. If diesel price is cut by about ₹ 2 per litre, it could benefit the trucking industry and help improve the fleet utilisation, which has been hit over the past three months due to paucity of cargo for the return trip.

IFTRT observed that the implementation of GST would bring down prices by 7-9 per cent. "Road transport will become more efficient and its productivity may go up by 30-40 per cent. So, transportation cost may also come down. GST regime may also bring tax evaders in this segment under the tax net as it would be difficult to ferry untaxed and under-reported cargo," it added.

Meanwhile, there has been a sudden contraction in M&HCV (truck) sales in the past few months. While industry analysts point to factors such as reducing replacement demand and weak cargo from industrial sectors among others, IFTRT noted that trucking industry was analysing the post-GST impact before purchase of new trucks.

“Fleet owners have a put brake on fresh buying of heavy trucks and even pre-buying rush of BS-III trucks as there is a view that post-GST prices of BS-IV norms trucks will be lower,” said Singh.

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