Truckers overload to offset higher costs

Truckers overload to offset higher costs

Mumbai: Overloaded trucks are back on the roads as fleet operators try to protect profits in the face of rising fuel prices and high borrowing costs that has impacted expansion.

“The idea is to keep the cost per kilometre under control. Truckers choice but to adopt every means, including overloading, to keep costs at bay," said Charan Singh Lohara, president of the All India Motor Transport Congress, an association of road cargo and passenger transporters. “They are finding it difficult to keep what they have running. Where is the question of buying new ones?"

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Overloading exacts a high price on Indian highways. As many as 7,654 people died in 2006 — the latest year for which detailed data is available — in accidents due to loads jutting out from commercial cargo carriers, particularly those carrying construction material, according to data compiled by New Delhi-based Institute of Road Traffic Education.

The Supreme Court in November 2005 directed state governments not to let such overloaded vehicles pass by just paying a fine. The prohibition, however, is no longer deterring truckers.

“As freight rates have failed to keep pace with rising operating costs, freight operators have resumed overloading and postponed their expansion plans," S. Ramnath, an analyst with Mumbai-based brokerage IDFC-SSKI Securities Ltd, wrote in a September report.

“Though the Indian economy is still growing at 8% a year, small truck operators are feeling the pinch of higher interest rates and rising operating costs," the report added.

Lohara also said that single-vehicle operators are unable to handle inflationary pressures and many have gone under, while larger companies are having a hard time meeting operating costs.

Industry analysts and experts say there is a direct link between overloading and freight rates. According to Arvind Kumar, adviser to the ministry of road transport and highways, India has one of the lowest freight rates among all developing countries.

“My operating costs between Mumbai to Delhi has gone up by at least 40% since 2004, whereas the freight rates have only gone up by 15-20%," said N.L. Gupta, managing director of Mumbai-based Caravan Roadways Ltd and chairman of industry lobby group Maharashtra Goods Transport Association.

Gupta says that profit margins of transporters are currently at their lowest and show little sign of improving, as a result of which purchase of new vehicles are on hold. “People are only exchanging old vehicles with new ones. No new vehicles are being added to the fleet," he said.

Part of the problem of overloading, said Lohara, is a mindset among truckers to overload even when freight rates are high. “Truckers overload even during peak season when freight rates are high as they want to keep the cost per kilometre at the lowest," he said.

Toll charges on many highway stretches are also playing their part in rising operating costs. “Today, an average transporter forks out Rs15,000-Rs20,000 per month (on toll charges) on a vehicle plying on long routes," Lohara said. It also means that overloading is largely restricted to goods being transported within state limits as national highways have weighing bridges at state borders that keep truckers on their toes.

However, the problem is also partly due to slackening enforcement, say experts. “The flurry of activities which one saw in 2006-07, the year the (Supreme Court) regulation came into effect, is not there any more. Transporters agree it’s not as strict as it was," said Sachin Mathur, head of Crisil Research and Information Services Ltd, the India research arm of credit reporter Standard and Poor’s.

Lohara admits that while overloading is a serious issue, it is not being addressed directly as it affects costs for all parties involved, from the individual or firm shipping the goods to the transporter.

Last year, said Kumar, adviser to the ministry, a proposal to amend the Carriage by Road Act was tabled, seeking to distribute the liabilities from overloading between transporters, consignors and insurers in case of damage or loss of goods during transit and create more accountability. No decision has been taken on this yet. Lohara also says truckers “are only looking for a quick-fix solution to contain costs, hence the overloading".