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Freight demand drops in November

Suresh P. Iyengar | | Updated on: Dec 03, 2021
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Amid slower industrial activity and high cost of transportation

The freight movement dipped last month due to slower industrial activity and high cost of transportation.

The quantum of freight moved was flat to negative in the month after the pre-festive buzz in October, according to a Crisil Research report.

However, the cut in taxes and fall in crude oil prices is expected lower the cost of transportation.

Despite cut in diesel prices, profit of transport companies fell month-on-month in November as freight demand dipped.

Also read: Truckers gear up for happy journey

However, freight rates for haulage of essentials such as FMCG had remained relatively resilient in November.

After the festive stock-up, freight rates for discretionary goods such as auto carriers and textiles are seeing more pressure compared to other sectors.

Mining, cement and steel freight rates have also fallen as infrastructure activity was subdued month-on-month. However, the drop is not significantly more than the fall in diesel price in the case of cement, said the report.

In the first week of November, the Centre announced a ₹10 per litre reduction in the Central Excise applicable on diesel. A few States also followed suit by announcing additional cuts in State taxes on diesel.

This augurs well for the profitability of transporters. However, the freight industry is very dynamic and competitive, so demand-supply factors also play a material role in freight rates.

The excise duty cut translates to a 3-5 per cent reduction in the cost structure of a transporter. Add the cropping of VAT rates by a few States, and the reduction would be 4-6 per cent.

Published on December 03, 2021

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