After demonetisation of high value currency in India, the transport industry is grappling with cash shortages, which has affected truck operations across India. Cash shortage is threatening timely delivery of goods to consumers and businesses. This is understandable as in India road transport is a $100-150 billion industry, growing at 13-15 per cent.
Within road transport, trucking amounts to $80-100 billion spend of the overall road transport operations and 90 per cent of trucking spend and 40-50 per cent of the non-trucking transport spend is rendered in cash.
Almost 85 per cent of truck owners who own less than five trucks spend hard cash for diesel purchase, which comprises 45-50 per cent of the cost of trucking. Toll charges, which amount to 10-15 per cent of the trucking cost and other overheads such as driver wages, loading & unloading charges and a sizable amount are being paid at various levels on the NH and vehicle maintenance must be paid in cash. Only EMIs and replacement capex, including tyre-related expenses, are done to an extent through digital modes such as bank transfers and cheque payments.
Overall, the road transport cash spend is estimated to be Rs. 6,50,000 crores to Rs. 7,50,000 crores which could be 40 per cent of the cash in circulation in the economy. This is assuming the multiplier effect of currency to play both ways, which is, the drivers who now get paid through digital modes will largely continue to spend through digital modes.
Making road transport cashless has the potential to reduce the Indian economy’s cash needs by 40 per cent and can drive demonetisation forward and revamp the entire sector by making it faster, reliable and more efficient.
Operations in the trucking sector can be made entirely cashless through use of E-POD to get direct payment transfers from customers, automated bank transfers with the breakthrough same day settlement for brokers, integrated payment solutions with fuel companies for dealer payments and toll payments can be achieved through the NHAI initiative on FAST tag through RFID tags and wallet solutions. Also, truck owners can remunerate truck driver wages, reimbursements and incentive payments directly through the Jandhan accounts.
Apart from digitization and faster turnaround of trucks, the cashless trucking economy will yield significant second order benefits. It will ensure less inefficacy due to proper accounting of cash-related wastages (fuel, toll payments). There are several examples of kerosene mixing by drivers and taking poor quality roads to avoid toll cash, which lead to the poor health of the fleet and is a safety hazard.
On the other side, drivers will face less harassment and corruption from RTO and sales tax on highways and check-posts. It will also improve road safety and adherence to regulations as it is a level playing field for compliant and non-compliant fleet owners, as a result overloading and violation of safety norms won’t happen. Truck drivers, loaders and all the large skill pools can be brought into the mainstream economy and they can qualify for loans from financial institutions.
Further, it will also ensure the employers and contractors pay minimum wages to workers in this sector. Cash also leads to higher propensity of substance abuse (including alcohol) and make roads unsafe. It has the potential to negatively impact the commercial sex worker trade on the highways, which leads to a large incidence of HIV amongst truck drivers.
There is a short-term pain to the sector due to lack of cash, but in the medium term it can turn around the sector completely by making it efficient and safer and contribute significantly to making India cashless.
By A. Peer Mohamed, Secretary, Federation of Transport Pondicherry