The transport strike threat after the diesel price hike on June 4 led to an 8-10 per cent jump in truck rentals and 10-15 per cent increase in retail parcel booking freight rates in the country. With the strike called off within two days, truck rentals are expected to drop sharply as excess truck fleet supply and lower cargo offering would push down trucking movement, according to the Indian Foundation of Transport Research and Training (IFTRT).
IFTRT has been closely monitoring the truck rental trends, particularly since the so-called dismantling of the petroleum product pricing mechanism from April 2002, growth of road and rail freight, and the impact of these developments on commercial vehicle sales in India. Apart from this, IFTRT has been focused on statutes relating to regulation of road transport and problems concerning urban transport. Its think-tank has been reaching out to different areas through its network to gather information to bring out reports and analyses at regular intervals.
Meanwhile, transport operators went on a nationwide strike in the first week of July seeking redressal of their demands related to diesel price and availability, toll on highways, service tax exemption and fitment of speed governors in trucks, etc. However, unlike the earlier transport strikes of August 2004 and November 2001, the general impact on transport operations in the country this time was partial with some difficulty in availability of trucks experienced in certain parts of Tamil Nadu, Andhra Pradesh and Gujarat. Movement of essential commodities and booking and delivery of retail parcel cargo was marginally affected in some of the trading centres in the country though truck associations in more than 10 States straightaway refused to participate in the agitation.
It is understood that the Ministries of Finance and Road Transport and Highways have indicated to issue some clarifications on the points raised by the agitating transporters before the Government with particular reference to service tax evasion. On the midnight of July 3-4, the transporters’ strike was called off after their agreement with the Ministry of Road Transport on all the contentious issues raised by them.
Ever since international crude oil prices touched $135 per barrel in April, the writing on the wall was clear that petroleum product prices would definitely be revised upward. However, the Government began to work out a package of measures to soften its impact on the common man. As a result, the Government allowed oil companies to increase fuel prices by Rs. 5 per litre for petrol and Rs. 3 for diesel with effect from June 5.
IFTRT has tried to examine the weighted impact of the diesel price hike on truck owners, cargo booking firms / agents, logistics companies, packers and movers as well as on large manufacturers and small & medium enterprises. It has also tried to analyze how in the bargain the diesel price increase is actually and fairly impacting the common man.
Meanwhile, most of the State Governments reduced the local sales tax on diesel in order to moderate the diesel price hike. As a matter of fact, for several days, the average diesel price for an inter-State trucker is Rs. 2 per litre instead of Rs. 3 as announced earlier.
As a consequence of effective diesel price hike of Rs. 2 per litre, the truck rentals should have only gone up by 3-3.5 per cent on the inter-State trunk routes as prevailing a day before the announcement of the fuel price hike. However, truck rentals have been revised upward by 8-10 per cent at various transport centres by truck unions by taking advantage of the transport strike threat.
The following table gives truck rental movement during June 4 – July 3.
Although oil companies raised the diesel price by Rs. 3 per litre on June 3, after reduction of sales tax on diesel by most of the State Governments, the actual average diesel price hike turns out to be Rs. 2 per litre and the same is 3.35 per cent as weighted impact of transport cost on truck rentals prevailing on June 4. However, the increase in truck rentals during the four weeks has been 8-10 per cent on different trunk routes and the truck rentals have outpaced the actual weighted increase in diesel as the cost of operation for a trucker. This has been possible due to the hike in rentals by the trucker unions in various States and the transporters’ threat to go on an indefinite strike from July 2. However, the agitation had no serious impact on transportation of goods and, therefore, truck rentals in the next couple of weeks may nosedrive.
Truck rentals would be determined more by the demand and supply mechanism than the artificial strangulation of market. The transport strike has fizzled out. The supply of trucks will exceed demand in the coming days. As a result, the same will adversely impact truck rentals which are likely to drop sharply on trunk routes.
